GIFT  OF 


LEWIS -SYLVAN  DEBATE 


ON 


GOVERNMENT  OWNERSHIP 
OF  TELEPHONES  AND  TELEGRAPHS 


Giving  Speech  of  Mr.  T.  P.  Sylvan,  Assistant  to  Vice-President, 
New  York  Telephone  Company,  in  Debate  with  the  Hon. 
David  J.  Lewis,   Representative  from  Maryland, 
before  the  Providence  Economic  Club,  Provi- 
dence, Rhode  Island,  April  22,  1914. 


/ 


rt?: 


American  Telephone  and  Telegraph  Company 

Commercial  Engineer's  Office 
New  York 


Following  is  the  address  of  Mr.  T.  P.  Sylvan,  Assistant  to  Vice- 
President,  New  York  Telephone  Company,  in  a  debate 
with  Congressman  David  J.  Lewis,  of  Maryland,  held  be- 
fore the  Providence  Economic  Club,  Providence,  Rhode 
Island,  April  22,  1914.  Owing  to  the  limitation  of  time,  a 
number  of  quotations  given  here  in  full  were  merely  re- 
ferred to  in  the  abstract  in  the  actual  delivery  of  the  address: 


Mr.  President  and  Members  of  the  Economic  Club: 

I  trust  you  will  bear  with  me  because  I  have  got  somewhat  of  a 
cold,  but  I  shall  try  to  make  myself  heard.  It  is  indeed  a  pleasure  to 
come  to  a  gathering  of  this  kind  and  see  so  many  people  interested  in 
this  subject,  because,  from  my  way  of  looking  at  it,  all  that  we  need  is 
a  careful  consideration  of  this  question.  Like  Mr.  Lewis,  we  too,  are 
content  to  appeal  to  the  good  sense  of  the  people.  We  have  got  to 
approach  this  thing  in  a  calm  and  deliberate  manner.  There  is  no 
necessity  of  becoming  excited.  The  country  is  not  particularly  suffer- 
ing in  the  meantime. 

No  Stockholders'  Brief 

I  do  not  come  here  tonight  with  a  brief  for  the  stockholders  of 
the  Bell  System.  Our  organization,  as  Mr.  Lewis  himself  has  stated, 
in  his  address  before  the  Republican  Club  in  New  York  City  last  Jan- 
uary, is  one  of  the  few  in  the  country  whose  securities  are  free  from 
water  or  inflation. 

His  words  were: 

"Be  it  said  for  the  Bell  System  that  it  is  the  one  great  corporation  in  our 
country  that  has  not  issued  tons  of  counterfeit  capital.  Its  stocks  and  bonds 
to-day  represent  the  actual  contributions  of  its  shareholders  in  money  to  a 
great  common  enterprise,  and  we  will  not  have  that  unfortunate  circumstance 
to  deal  with  in  the  valuation  of  their  properties." 

The  capitalization  of  the  Bell  System  is  based  upon  honest  invest- 
ment, and  the  actual  value  of  the  property  is  considerably  in  excess  of 
the  par  value  of  the  securities ;  so  that  if,  after  a  calm  and  painstaking 
investigation,  the  Government  should  decide  to  take  over  the  property 
of  the  Bell  System,  it  would  have  no  trouble  from  that  score,  nor  would 
the  stockholders  suffer  any  loss  save  the  temporary  inconvenience  of 
reinvesting  their  funds,  which  would  be  returned  to  them  intact. 

3 


347521 


Legal  Objections  Not  Considered 

Nor  do  I  approach  this  subject  from  the  legal  standpoint.  To  be 
sure,  the  legal  problem  involved  is  by  no  means  unclouded,  and  pre- 
sents a  number  of  very  grave  questions  whose  determination  is  far 
from  simple.  Are  the  State  of  Rhode  Island  and  the  City  of  Provi- 
dence, for  instance,  ready  to  give  up  their  control  and  supervision 
over  so  important  a  part  of  their  affairs  as  the  telephone,  and  allow 
the  Federal  Government  to  step  in  and  silence  their  authority  forever, 
eliminating,  at  the  same  time,  the  important  source  of  revenue  from 
taxation,  which  is  now  being  derived  from  the  telephone  property? 
However,  I  do  not  propose  to  take  up  this  and  other  similarly  import- 
ant questions,  because,  I  am  sure,  a  consideration  of  the  purely  eco- 
nomic aspects  of  the  subject  will  decide  this  case  in  favor  of  the  present 
system  of  regulated  private  ownership,  and  make  unnecessary  the  con- 
sideration of  the  legal  or  other  objections. 

Efficient  Service  the  Main  Question 

I  approach  this  subject  from  a  far  broader  point  of  view;  from 
the  standpoint  of  service — efficiency  of  service.  That  is  the  basis  upon 
which  this  whole  matter  of  government  ownership  must  be  settled. 
And  when  I  say  "efficiency,"  I  mean,  of  course,  the  quality  of  the 
service  and  the  price  of  the  service,  for,  after  all,  these  are  the  ques- 
tions in  which  the  public  concerns  itself  in  its  attitude  toward  the 
telephone. 

Now  in  this  question  of  efficiency  of  service,  the  interests  of  the 
public,  of  course,  very  properly  take  first  place ;  and  we,  the  employees, 
— for  I  number  myself  one  of  an  army  of  150,000  who  are  serving  the 
public  in  this  matter — must  necessarily  take  the  second  place.  From 
my  way  of  looking  at  this  telephone  proposition,  it  is  not  a  question  of 
ownership  so  much  as  it  is  a  question  of  the  organization  itself — a 
great  big  machine  that  is  serving  you  to-day ;  and  that  machine  consists 
of  this  army  of  employees,  and  anything  which  will  make  that  machine 
more  efficient  and  which  will  permit  it  to  work  more  efficiently  and 
more  economically  than  it  does  to-day,  is  to  be  commended,  but  any- 
thing which  will  make  that  machine  run  more  slowly  or  with  more 
difficulty,  must  be  discarded.  To  show  how  important  a  factor  is  the 
personnel  of  the  organization,  as  distinguished  from  the  owner — the 
stock  and  bond  holder — I  might  mention  that  the  Bell  System  to-day- 
pays  out,  in  the  form  of  salaries  and  wages,  50 %  of  the  money  it 
receives  from  the  public,  and  the  amount  paid  out  in  the  form  of  inter- 
est and  dividends  represented,  during  the  last  year,  but  4.92% — less 
than  5% — upon  the  actual  plant  in  service.  Now,  I  say,  gentlemen,  a 
lot  of  credit  is  due  to  great  men  like  Mr.  Vail — and  Mr.  Lewis  is  will- 
ing to  and  does  give  him  a  measure  of  that  credit — when  you  stop  to 
think  that,  in  reducing  this  interest  charge  to  4.92%,  he  has  done  so  by 
taking  advantage  of  the  credit  of  our  Company.  More  than  $26,- 
000,000  has  been  turned  into  the  treasury  of  the  American  Telephone 
and  Telegraph  Company  by  the  use  of  convertible  bonds  at  times  when 
our  credit  warranted  getting  prices  in  excess  of  par.  It  is  by  this 

4 


means  that  we  have  been  enabled  to  cut  down  the  interest  charges  on 
investment  to  the  low  figure  of  4.92%  on  the  value  of  the  plant  in 
service.  While  it  is  true  that  &%  is  paid  on  some  of  our  securities,  less 
is  paid  on  bonds  and  other  securities,  and  nothing  at  all  on  the  $26,- 
000,000  just  mentioned. 

Public  Service  Motive  Qualified 

Mr.  Lewis  lays  great  stress  upon  the  "public  service  motive"  as 
distinguished  from  the  "private  service  motive,"  and  attempts  to  show 
how  the  "public  service  motive"  has  dominated  the  administration  of 
the  Post  Office  Department.  Now  I  say  that  the  "public  service  mo- 
tive," in  its  narrower  sense,  which  absolutely  ignores  questions  of  cost 
or  distribution  of  cost  burden,  is  inherently  wrong,  and  I  am  glad  that 
our  present  Postmaster  General,  unlike  Mr.  Lewis,  has  had  the  dis- 
cernment to  temper  and  qualify  the  "public  service  motive"  as  he  did 
in  his  last  annual  report,  when  he  brought  out  the  fact  that  the  experi- 
ment of  free  mail  delivery  in  villages  had  been  abandoned,  because  he 
found  that  more  just  and  equitable  results  could  be  obtained  by  having 
the  people  call  for  their  own  mail,  rather  than  having  the  underpaid 
carriers  brin^  it  to  them.  On  page  34  of  his  last  annual  report,  the 
Postmaster  General  says: 

"The  results  attained  during  the  year  are  believed  not  to  warrant  the  con- 
tinuance or  extension  of  village  delivery.  There  is  no  such  need  or  demand 
for  free  delivery  of  mail  in  small  towns  and  villages  as  there  is  in  cities  and 
rural  districts,  and  its  establishment  does  not  occasion  any  appreciable  increase 
in  the  use  of  the  mails.  An  economical  administration  of  such  a  service  would 
require  the  limiting  of  delivery  in  nearly  every  instance  to  one  a  day  and  the 
employment  of  carriers  at  salaries  lower  than  those  paid  to  city  and  rural 
carriers.  Such  service  is  regarded  as  inferior  by  the  patrons,  who  in  such  com- 
munities live  near  the  post  office  and  are  in  the  habit  of  calling  two  or  three 
times  a  day  for  their  mail.  The  low  salaries  of  the  carriers,  moreover,  would 
not  conduce  to  efficient  service." 

Public  Insured  Proper  Treatment  by  Regulation 

On  the  other  hand,  the  so-called  commercial  motive,  in  its  narrow- 
est sense — in  the  sense  that  it  looks  merely  to  the  immediate  profit  and 
disregards  those  considerations  of  public  service  which  make  for  per- 
manency and  secure  the  establishment  of  good  will — is  equally  wrong. 
We,  and  all  other  progressive  concerns,  have  long  since  learned  that 
our  most  valuable  asset  is  not  an  immediate  and  excessive  profit,  dic- 
tated by  any  narrow  or  selfish  policy  to  which  Mr.  Lewis  refers  in  his 
exposition  of  the  "private  service  motive,"  but  a  continuous  fair  profit, 
and  a  contented  public.  A  significant  factor,  however,  which  Mr. 
Lewis,  in  all  his  remarks,  seems  to  have  ignored,  is  that  the  public 
itself  has  recognized  this  principle,  and,  instead  of  leaving  it  to  the 
good  sense  of  the  corporation  to  enforce  it,  has  enforced  the  principle 
itself ;  has  instituted  a  system  of  proper  public  regulation  of  utilities, 
to  the  end  that  there  may  be  a  blending  of  the  "public  service  motive" 
with  the  "private  service  motive,"  whereby  the  best  results  can  be  and 
have  been  most  happily  obtained.  The  public  has  taken  up,  if  you 

5 


please,  that  principle  which  Mr.  Adams  pronounced  way  back  in  1887, 
and  which  Mr.  Lewis  appears  to  have  only  just  discovered,  and  has 
said  that  these  large  institutions  that  serve  the  public  must  not  be  left 
unregulated.  The  public  has  not  taken  it  up  as  a  measure  of  ill-will 
toward  the  companies,  nor  as  any  evidence  of  a  crying  necessity,  but 
with  the  idea  of  equal  protection  to  public  and  public  utility  alike.  It 
said,  in  substance,  "We  are  going  to  protect  the  utilities  in  the  exercise 
of  their  functions,  so  long  as  they  properly  serve  the  public."  In  prac- 
tically every  State  of  the  Union  to-day,  we  have  these  regulative  bodies 
as  a  part  of  the  fundamental  law.  As  an  instance  of  protection  to  the 
utility,  you  have  got  to  prove  "public  necessity"  to  the  Commission, 
before  you  can  enter  a  field  already  served,  in  the  proper  meaning  of 
the  word.  As  an  instance  of  protection  to  the  public,  you  have  the 
Interstate  Commerce  Commission,  with  its  tremendous  power,  illustra- 
ted to-day  in  its  control  of  the  railroad  situation,  with  the  railroads 
appealing  for  an  increase  in  rates — not  a  cent  of  which  can  be  granted 
without  the  approval  of  the  Commission. 

Now,  I  say  that  the  public  has  taken  this  matter  in  hand,  and 
decided  that  these  public  regulative  bodies  shall  first  be  considered 
and  consulted,  before  the  utility  can  take  any  step  affecting  the  rights 
of  the  public.  They  can  be  made  use  of  by  every  citizen.  There  is 
absolutely  no  red  tape.  You  do  not  have  to  employ  an  attorney.  You 
write  a  letter  and  get  a  hearing.  And  that  is  all  there  is  to  it.  The 
Commission  sits  as  a  public  tribunal  and  metes  out  justice  in  exact  pro- 
portion as  is  merited  by  the  complaint. 

So  that,  in  all  this  talk  about  "public  service  motive"  and  "private 
service  motive,"  we  must  remember  that  the  public  has  recognized,  and 
has  enacted  into  its  fundamental  laws,  the  principle  that  a  "public  serv- 
ice motive"  which  runs  counter  to  good  business  sense,  which  ignores 
questions  of  price  and  cost,  (without  which  you  cannot  determine  how 
efficiently  and  economically  your  property  is  operated),  is  just  as  wrong 
as  the  "private  service  motive,"  which  recognizes  immediate  profit, 
and  that  alone. 

Furthermore,  we  have  something  to-day  that  I  am  glad  we  have, 
and  that  is  potential  competition,  and  it  is  something  that  the  people 
want,  and  must  retain,  because  I  can  conceive  how  there  may  come  a 
time  when  a  utility,  governmental  or  private,  by  reason  of  a  change  in 
personnel,  may  lose  public  support  and  confidence.  In  such  a  case, 
under  our  present  laws  as  they  stand  to-day,  the  public  has  recourse  to 
the  ever  present  competition  which  may  be  changed  to  actual  competi- 
tion when  the  community  feels  that  matters  have  come  to  such  a  pass 
as  to  make  such  a  change  desirable,  and  this  potential  competition  is 
one  of  the  strongest  weapons  which  the  public  has  to  defend  itself 
against  any  such  emergencies  as  may  arise  in  the  course  of  time. 

Regulation  Should  Be  Given  Fair  Trial 

Now,  the  only  way  Mr.  Lewis  or  any  one  else  can  ignore  this 
question,  is  by  saying,  fundamentally,  that  regulation  has  proven  a 
failure.  And  how  can  any  man  in  this  country,  with  regulation  prac- 

6 


tically  a  new  thing,  take  that  stand?  To  adopt  this  stand,  one  must 
entirely  ignore  the  present  tendency  of  our  administration;  must  say 
that  all  the  efforts  now  being  directed  by  the  public  in  improving  and 
strengthening  our  machinery  of  public  regulation  are  purely  so  much 
wasted  effort ;  that  Congress,  itself,  is  wasting  the  public  funds  upon 
a  fruitless  task  in  its  work,  begun  a  short  time  ago,  through  the  Inter- 
State  Commerce  Commission,  of  undertaking  the  valuation  of  all  tele- 
phone and  telegraph  companies  in  this  country, — a  task  which  the 
Commission  is  now  engaged  upon,  and  for  which  a  great  deal  of  time 
must  necessarily  be  expended.  To  take  such  a  stand,  one  must  be 
ready  to  condemn  the  whole  scheme  of  public  regulation  at  its  very 
inception ;  declare  that,  although  in  its  formative  stage,  it  has  failed  in 
its  mission.  That  is  something  I  cannot  understand.  Mr.  Lewis  knows 
that  in  his  own  home  State,  the  Public  Service  Commission  is  to-day 
engaged  in  a  state-wide  rate  investigation,  to  determine  upon  the  pro- 
priety of  the  scheme  of  state-wide  telephone  rates,  and  that  the  same 
is  being  done  in  the  State  of  Pennsylvania,  and  elsewhere,  and  that  an 
honest  effort  is  being  made,  with  the  cooperation  of  the  Telephone 
Company  and  the  Public  Service  Commission,  to  determine  upon  a  fair 
valuation,  and  to  reach  an  adjudication  of  what  is  a  proper  and  reason- 
able rate  for  reasonable  service.  On  the  part  of  the  Company  there  is 
nothing  but  an  honest  effort  to  submit  to  a  question  of  justice,  nothing 
but  the  laying  of  the  cards  on  the  table  so  that  the  public  may  see  and 
judge,  and,  on  the  part  of  the  Commission  there  is  nothing  but  a  pains- 
taking and  scientific  effort  to  base  action  upon  knowledge,  and  knowl- 
edge alone.  Will  Mr.  Lewis  say  that  all  this  is  idle  and  fruitless? 


Complete  Unregulated  Monopoly  Proposed  by  Mr.  Lewis 

But  if  we  change  all  this — change  our  fundamental  and  painstak- 
ingly wrorked  out  plan,  which  the  public,  in  its  wisdom  has  set  up — 
where  do  we  land?  We  not  only  lose  this  scheme  of  control  and  regu- 
lation— but  see  what  we  substitute.  Not  long  ago,  the  Attorney  Gen- 
eral, with  a  great  deal  of  pride,  pried  apart  the  telephone  and  the  tele- 
graph on  the  sole  assumption  that  those  two  were  competitive  services, 
and  should  not  be  under  one  head.  This  cost  the  American  Telephone 
and  Telegraph  Company  a  good  deal,  but,  as  decent  citizens,  we  obeyed 
the  order  without  protest.  We  separated.  And  the  President  of  the 
United  States  came  out  in  a  hearty  public  commendation  of  this  action. 
Now  comes  our  friend  Mr.  Lewis  and  seeks,  not  only  to  re-unite  the 
telephone  and  the  telegraph  into  one  agency,  but  to  amalgamate  the  two 
with  the  postal  service,  so  that  the  three  agencies,  which,  according  to 
the  views  of  the  administration,  are  to-day  in  a  measure  competing — 
and  I  might  say  competing  in  the  sense  that  to-day  you  have  the  choice 
open  to  you  to  send  your  communication  by  first-class  mail,  telegram 
or  telephone,  as  you  please — these  three  conveniences  are  to  be  lumped 
together  into  one  service,  and  what  was  wrong  on  the  part  of  private 
companies,  is  to  become  right  on  the  part  of  the  Government.  You  are 
to  have  absolutely  no  chance  for  protest  or  appeal  to  commissions  or 

7 


courts.  If  you  are  dissatisfied  with  the  mail  and  want  to  use  the  tele- 
gram, you  go  to  the  Government ;  if  you  are  dissatisfied  with  the  tele- 
gram, and  want  to  use  the  telephone,  you  go  to  the  Government ;  and 
if  a  condition  of  public  service  arises  where,  from  a  series  of  accumu- 
lated abuses,  the  public  is  seeking  relief,  nothing  short  of  a  political 
revolution  will  secure  the  necessary  attention. 


Deliver  Us  From  Politics 

Gentlemen,  I  have  worked  for  many  years  in  telephoning,  and  I  have 
never  yet  had  my  "boss"  ask  me  what  my  party  was  or  which  way  I 
intended  to  vote.  I  tell  you  it  is  a  serious  matter  if  we  are  to  add  to 
the  many  questions  before  the  public  to-day,  such  as  the  monopoly 
question,  the  tariff  question,  the  money  question,  and  many  others,  on 
top  of  them  the  question  of  local  telephone  service — of  your  telephone 
service,  for  instance,  here  in  Providence.  So  that  you  find  yourself  in 
a  situation,  say,  where,  if  the  man  whom  you  have  sent  to  Washington 
to  represent  you  because  he  stands  for  all  you  hold  dear  on  questions 
of  tariff,  does  not  happen  to  suit  on  the  post  office  and  telephone  propo- 
sition, you  have  just  got  to  take  the  telephone  and  let  the  tariff  go,  or 
take  the  tariff  and  let  the  telephone  go.  To  say  the  least,  this  is  an 
exigency  which  may  arise  if  the  Government  of  the  United  States 
claims  a  monopoly  on  all  means  of  communication. 


Present  Conditions  Right 

Now  I  say  that,  in  the  face  of  present  conditions,  Mr.  Lewis  and 
everybody  else  must  acknowledge  that  rates  in  this  country  and  con- 
ditions of  telephone  service  are  right.  If  they  are  not  right,  he  has 
access  to  the  Interstate  Commerce  Commission,  and  practically  every 
State  commission  in  the  country,  to  see  that  they  are  made  right.  This 
is  not  merely  his  privilege,  it  is  his  duty  as  a  citizen  and  it  is  anybody's 
duty  that  has  any  complaint  against  telephone  rates  or  telephone  serv- 
ice, to  go  before  the  Commission  to  secure  a  proper  determination  of 
the  matter.  So  I  say  I  do  not  care  what  comparison  Mr.  Lewis  makes 
as  to  foreign  rates,  the  rates  here  should  be  assumed  to  be  right  until 
otherwise  determined.  They  have  been  filed  with  the  Commission  by 
the  Company,  and  the  Company  stands  ready  to-day  to  meet  any  criti- 
cism manfully  and  fairly  and  to  make  or  accept  any  change  or  pro- 
vision that  is  proven  just  and  reasonable.  Now,  gentlemen,  remember 
that  in  your  public  service  regulation  you  have  been  clean,  fair  and 
decent.  You  have  insisted  that  whatever  action  is  taken  shall  be  taken 
only  upon  thorough  investigation,  to  the  end  that  no  action  shall  be 
taken  except  as  it  is  preceded  by  exact  knowledge.  You  have  said  that 
our  earnings  shall  not  be  based  on  water,  on  error,  mistake,  on  ineffi- 
cient management  or  excessive  cost,  but  that  they  shall  be  based  upon 
the  fair  value  of  the  property  used  and  useful  in  the  service.  Can  any 
one  claim  a  basis  fairer  than  that  for  rate  making? 


Public  Approve  Service 

Not  only  are  telephone  rates  and  conditions  of  service  as  they 
should  be,  sanctioned  by  the  public,  through  its  regularly  constituted 
public  service  tribunals,  but  the  public  has  shown,  by  the  best  test 
possible — the  use  of  the  service — the  extent  to  which  the  telephone 
service  has  met  with  its  approval.  I  mean  by  this  that  when  it  conies  to 
development,  the  United  States  is  so  far  in  the  lead  over  countries 
where  government  ownership  obtains,  that  comparisons  of  telephone 
development  are  almost  laughable.  You  will  remember  very  clearly 
that  Mr.  Lewis  made  the  statement  just  before  he  sat  down  that  it  was 
our  great  and  noble  general,  Theodore  N.  Vail,  who  laid  down  the 
slogan  for  his  army  to  follow,  that  he  would  not  rest  content  with  the 
development  of  our  telephone  service  until  there  was  a  telephone  in 
every  man's  house.  That  was  the  slogan  of  our  system  long  ago ;  that 
is  the  goal  we  have  been  trying  to  reach  for  years.  That  is  to-day  our 
aim,  and  I  propose  to  show  you  that  we  have  come  nearer  to  this  goal 
than  any  other  country  on  the  face  of  the  earth. 

United  States  Telephone  Center  of  World 

There  are,  to-day,  in  this  country,  upwards  of  9,000,000  telephones. 
The  United  States,  with  less  than  6%  of  the  world's  population,  has 
more  than  65%  of  the  world's  telephone  development.  Europe,  with 
four  times  the  population  of  the  United  States,  has  less  than  one-half 
the  number  of  telephones.  Not  so  bad,  Mr.  Lewis,  for  private  enter- 
prise. 

The  United  States,  according  to  the  census  just  published,  has  nine 
telephones  per  hundred  inhabitants,  and  has  gained,  during  the  last 
year,  nearly  as  many  stations  as  Great  Britain  has  to-day  in  its  entire 
system.  Great  Britain,  by  the  way,  has  \y2  telephones  per  hundred 
inhabitants,  or  one-sixth  of  our  telephone  development.  Germany  has 
two  telephones  per  hundred  inhabitants;  Netherlands  two  telephones 
per  hundred  inhabitants;  Switzerland  two  telephones  per  hundred; 
Belgium  four-fifths  of  a  telephone  per  hundred ;  France  four-sixths  of 
a  telephone  per  hundred.  The  entire  country  of  France  has  about  the 
same  number  of  telephones  as  we  have  in  New  York  City  alone.  Not 
so  bad,  Mr.  Lewis,  for  private  enterprise. 

United  States  Service  Diversified 

And,  mind  you,  this  development  has  not  been  obtained  by  skim- 
ming the  cream  off  the  milk,  as  has  been  done  by  governments  in  the 
foreign  countries,  under  the  "public  service  motive."  Let  me  show  you 
how  we,  actuated,  as  Mr.  Lewis  would  say,  by  the  modern  "private  serv- 
ice motive,"  have  taken  care  of  the  outlying  and  rural  districts,  as  well 
as  our  big  cities.  There  is  a  gentleman  with  me  here  to-night  who 
formerly  worked  in  Indianapolis,  and  who,  years  ago,  tramped  through 
Indiana,  and  his  sole  mission  was  to  open  up  outlying  sections  and  to 
establish  rural  telephone  business  long  before  the  Post  Office  Depart- 
ment thought  these  sections  worthy  of  rural  mail  routes.  And,  mark 

9 


this,  Mr.  Lewis,  in  the  United  States,  with  our  so-called  "private  serv- 
ice motive,"  19J^%  of  our  exchanges  have  from  50  to  100  stations; 
25.8%  have  from  100  to  200  stations,  and  13.1%  have  from  200  to  300 
stations.  In  other  words,  about  60%  of  our  telephone  development  is 
to  be  found  in  exchanges  of  300  stations  or  less.  Compare  this,  if  you 
will,  with  the  urban  and  rural  development  of  foreign  governmental 
telephone  systems,  where  the  average  rural  development  represents  but 
21.2%  of  the  corresponding  urban  development.  How  about  this,  Mr. 
Lewis,  as  an  example  of  your  "public  service  motive?"  Why,  in  our 
State  of  Iowa,  which  is  highly  rural,  the  density  of  development  is 
greater  than  in  any  other  part  of  the  United  States.  How  about  this, 
Mr.  Lewis,  as  an  example  of  your  "private  service  motive?" 

Universal  Service  Slogan 

Now  we  have  been  accused — not  by  Mr.  Lewis,  I  am  glad  to  say, 
but  by  some  of  his  friends — that  we  have  been  remiss  in  connecting 
with  other  companies.  I  want  to  say  that  for  fifteen  years  I  have  been 
out  making  connecting  contracts  with  other  companies,  and  now,  as  a 
part  of  our  scheme  of  universal  service,  which  some  thoughtless  people 
have  mistaken  for  monoply — which  we  have  never  desired — I  say  we 
connect  with  nearly  3,000,000  stations  operated  independently  and  not 
controlled  by  the  Bell  Company.  We  have  been  striving,  as  I  say,  for 
universal  service,  not  universal  ownership.  The  song  Mr.  Vail  has 
sung  from  the  start  has  been  "universal  service ;"  in  other  words,  one 
system,  the  idea  being  that  every  telephone  in  the  United  States  may 
be  the  center  of  a  system,  and  that  isolation  shall  be  wiped  out  as 
rapidly  as  is  humanly  possible.  Through  the  aid  of  our  friend,  the 
Attorney  General,  this  movement,  in  the  direction  of  one  complete 
system  of  universal  service,  has  received  a  new  impetus  by  the  new 
arrangement  agreed  upon  for  connection  with  the  so-called  competitive 
exchanges.  We  shall  soon,  therefore,  realize  the  grand  spectacle  of  one 
system  with  universal  service  to  more  than  nine  millions  of  telephones. 
Not  so  bad  for  private  enterprise. 

Relative  Use  of  Telephone  a  Good  Test 

Now  with  nine  million  telephones  in  service  in  this  country,  Mr. 
Lewis  will  have  to  admit  that  we  have  a  pretty  fair  basis  of  comparison 
with  foreign  countries,  and  I  am  afraid  Mr.  Lewis  would  find  it  rather 
hard  to  fit  this  condition  into  his  theories  of  "public  service  motive" 
and  "private  service  motive."  But  this  is  not  all :  you  can  talk  as  much 
as  you  please  about  figures  and  foreign  lands,  but  there  is  one  com- 
parison which,  to  me,  seems  very  significant : — when  considering  first- 
class  mail  matter,  telephones,  and  telegraphs  as  alternative  means  of 
communication  in  Europe,  what  do  we  find?  We  find  that  in  Europe 
71.2%  of  all  such  communication  travels  by  mail.  The  corresponding 
figure  in  the  United  States  where  competitive  conditions  prevail,  is 
39.4%  by  first-class  mail.  And  when  we  come  to  the  telephone,  we 
find  that  of  the  total  communications  in  Europe,  27.3%  go  by  telephone. 
In  the  United  States  the  percentage  of  total  communications  that  go  by 

10 


telephone  is  60.2%.  Not  so  bad,  Mr.  Lewis,  for  the  poor  despised 
"private  service  motive"  telephone.  After  all,  Mr.  Lewis,  it  is  service 
that  counts ;  not  theories.  The  proof  of  the  pudding  is  in  the  eating — 
is  it  not,  Mr.  Lewis? 

There  is  one  more  point  about  Mr.  Lewis'  theory  of  "public  service 
motive"  and  "private  service  motive"  that  I  should  like  to  touch  upon, 
if  I  had  time,  and  that  is  Mr.  Lewis'  example  of  the  Chicago  and  Mil- 
waukee rate  case.  I  am  rather  surprised  that  Mr.  Lewis  should  have 
mentioned  this  case  again,  in  view  of  the  fact  that  he  must  have  seen 
how  utterly  unfair  this  example  was,  if  he  read  the  last  annual  report 
of  President  Vail.  Here  is  the  true  story,  as  it  appeared  in  President 
Vail's  last  annual  report,  of  The  Chicago  &  Milwaukee  Telegraph  Line, 
which  Mr.  Lewis  picked  out  as  an  example  of  the  viciousness  of  the 
"private  service  motive" : 

"The  Chicago  &  Milwaukee  telegraph  has  been  set  up  as  an  example  of  the 
evils  of  private  operation.  Why  this  single  line  of  some  fifty  miles  in  length 
should  have  been  selected  is  difficult  to  understand.  Any  line  situated  under 
such  favorable  conditions,  doing  business  only  between  two  large  cities,  should 
and  could  be  operated  at  rates  which  could  not  apply  to  lines  or  systems  which 
take  business  from  and  to  all  points,  while  the  peculiar  conditions  under  which 
this  particular  line  operated  put  it  absolutely  outside  of  comparison  whether 
with  other  lines  or  with  any  system.  The  history  of  this  company  is  well 
known,  and  if  not  known  to  those  who  have  used  it  as  an  illustration,  it  could 
have  been  obtained  with  little  effort. 

"Built  in  1878  by  some  linemen  as  a  speculation,  it  was  sold  to  some  mem- 
bers of  the  boards  of  trade  of  Chicago  and  Milwaukee  and  incorporated  with 
a  stock  of  $50,000.  The  business  of  this  line  was  confined  almost  exclusively 
to  messages  from  floor  to  floor  of  the  two  boards,  to  news  service  and  to  leas- 
ing private  lines.  While  it  accepted  other  service,  it  had  no  organisation  to, 
and  did  not  deliver  or  collect  messages  except  by  telephone.  The  company  ap- 
parently made  large  profits,  but  it  must  have  been  at  the  expense  of  mainte- 
nance and  depreciation,  for  later  on  the  company  was  reorganized  with  a  capi- 
tal stock  of  $50,000  and  $50,000  of  bonds,  and  the  lines  reconstructed.  This 
new  company  operated  until  1905,  when  it  went  into  receivership  and  the  lines 
were  operated  by  the  receiver  until  1907,  when  it  was  offered  for  sale,  and  the 
Chicago  and  the  Wisconsin  Telephone  Companies  needing  additional  lines,  pur- 
chased it  in  connection  with  the  American  Telephone  and  Telegraph  Company, 
for  toll  and  long-distance  business.  This  was  five  years  before  an  interest  in 
the  Western  Union  was  acquired  or  contemplated. 

"The  lines  are  now  used  for  telephone  business  principally.  The  commer- 
cial experience  and  history  of  this  line  are  not  such  as  make  it  a  good  argument 
for  lower  telegraph  rates,  either  under  private  or  government  operation,  and 
even  under  such  favorable  auspices  its  experience  was  certainly  not  such  as 
would  encourage  private  enterprise  in  another  attempt,  although  the  field  is 
open  to  all." 

Not  Yet  Through  Growing 

Now  we  have  been  accused  of  having  reached  the  zenith  of  our 
development;  that  under  private  ownership  we  won't  go  any  further. 
I  want  to  say  to  Mr.  Lewis  that  we  are  only  beginning  to  unfold  the 
possibilities  of  our  development.  Last  year  we  expended  on  the  Bell 
System  $55,000,000  for  additions  to  plant;  this  year  our  budget  calls 
for  $60,000,000.  And  we  are  going  to  keep  right  on  developing,  going 
forward,  if  only  the  public  will  let  us  by  continuing  their  encourage- 
ment. 

11 


Lewis  Figures  Analyzed 

And  now  as  to  the  comparisons  of  efficiency  and  rates  which  Mr. 
Lewis  has  made.  You  yourselves  know  how  easy  it  is  to  prove  any- 
thing by  stretching  statistics  this  way  or  that.  Figures  are  rather  dry 
at  best,  but  I  want  to  say  for  your  information  that  we  have  compiled 
a  study  of  the  comparisons  which  Mr.  Lewis  has  made  as  to  efficiency 
and  rates  between  the  United  States  and  foreign  countries.  If  you  care 
to,  you  can  obtain  copies  of  this  at  the  close  of  this  discussion.  You 
will  see,  I  think,  how  misleading  and  unwarranted  are  the  statistics 
which  Mr.  Lewis  has  presented,  and  upon  which  he  has  attempted  to 
make  his  case  for  Government  Ownership ;  you  will  see  how  artificial 
and  unreliable  is  the  fabric  of  statistics  which  has  been  constructed,  and 
you  will  find  that  our  exposition  of  this  fact  is  not  merely  controversial, 
but  is  based  upon  official  information  of  the  highest  sort,  and  this  in- 
formation is  not  only  cited  in  each  case  in  this  study,  but  we  are  ready 
to  have  anyone  who  desires,  including  Mr.  Lewis,  verify  the  informa- 
tion by  recourse  to  our  files. 

Peculiar  Methods 

The  funny  thing  about  these  statistics  is,  that  the  method  Mr. 
Lewis  adopted  in  figuring  efficiency,  was  to  take  the  total  number  of 
messages  and  divide  that  by  the  total  number  of  employees  engaged 
in  each  service,  and  then  to  call  the  result  the  showing  of  efficiency 
on  the  part  of  the  service.  You  can  see  for  yourself  how  impos- 
sible such  a  method  is,  in  order  to  get  a  true  showing  for 
efficiency.  For  one  thing,  we,  in  this  country,  unlike  the  government 
systems^  of  foreign  countries,  as  you  will  see  later,  are  constantly 
modernizing  our  plant,  and  looking  ahead  into  the  future,  and  by  this 
fact  alone  we  have  been  penalized  by  Mr.  Lewis'  efficiency  methods, 
because  we  have  a  lot  of  engineers  and  a  lot  of  men  constantly  en- 
gaged in  this  advance  construction.  Mr.  Lewis  had  no  difficulty  in 
picking  out  the  number  of  our  people  working,  and  he  said,  "We  will 
count  you  all."  I  suppose  if  we  had  dropped  this  large  force  of  men 
who  are  engaged  in  advance  construction,  who  are  engaged  in  work 
which  will  not  show  up,  perhaps,  for  years  to  come,  we  could  have 
shown,  according  to  Mr.  Lewis,  a  much  higher  "efficiency,"  because 
the  fewer  people  you  have  on  the  job,  the  higher  the  efficiency.  If  we 
could  cut  down  all  our  employees,  during  the  coming  year,  for  instance, 
who  are  not  engaged  directly  in  telephone  operating,  we  would  then, 
according  to  Mr.  Lewis,  show  a  marvelous  efficiency. 

But  when  Mr.  Lewis  came  to  foreign  countries,  he  found  a  pecu- 
liar situation.  If  you  will  look  at  the  report  which  was  prepared  by 
the  Post  Office  Department  recently,  and  submitted  by  Mr.  Burleson 
to  Congress,  you  will  find  that  the  figures  for  foreign  telephone  and 
telegraph  and  post  office  systems  are  presented  with  barrels  of  salt, 
by  way  of  foot  notes,  and  these  foot  notes  practically  say,  in  effect,  that 
you  cannot  determine  anything  as  to  the  results  of  operation  or  the 
number  of  employees  in  the  service,  because  the  post  office  and  the  tele- 
graph and  the  telephone  are  operated  jointly,  and  their  results  cannot 

12 


be  shown  separately.  For  instance,  in  Norway,  most  of  the  telephone 
employees  also  perform  mail  and  telegraph  duties,  and  a  very  small 
portion  of  the  whole  are  engaged  solely  in  telephone  work.  Now  to 
give  you  an  idea  of  how  simple  Mr.  Lewis  found  the  job  of  measuring 
efficiency  under  such  circumstances — he  simply  took  the  total  number 
of  telephone  messages  for  Norway,  and  then  divided  that  by  the 
number  of  employees  who  did  telephone  work  exclusively — and  the 
result  purported  to  show  what  Government  Ownership  does  for  the 
people. 

Our  Economy  Shown  by  Construction  Cost 

Well,  gentlemen,  despite  the  fact  that  we  have  been  keeping  up  pur 
plant  all  the  time,  that  we  have  been  engaged  in  advance  construction, 
far  into  the  future,  that  we  have  changed  from  the  grounded  to  the 
aerial  circuits,  and  from  the  aerial  to  the  underground  as  fast  as  we 
could,  and  that  we  have  not,  as  they  did  in  European  countries,  forced 
the  aid  of  municipalities  to  help  in  the  matter ;  despite  the  fact  that  we 
have  kept  in  advance  of  the  march  of  progress,  that  great  changes  have 
been  made  in  cable  construction,  cables  being  laid  underground  all  the 
way  from  Boston  to  Washington;  despite  the  fact  that  we  could  not, 
like  foreign  countries,  confiscate  property  and  rights  of  way,  but  had  to 
pay  good  hard  dollars  for  them,  let  us  see  how  our  real  efficiency  shows 
up  in  the  way  of  costs  in  this  country,  including  all  the  long  distance, 
underground  and  spare  plant — because  we  have  a  good  bit  of  spare 
plant.  You  would  not  have  to  do,  for  instance,  as  they  do  in  Tokio, 
Japan,  where  there  are  20,000  poor  Japs  seeking  telephone  service,  who 
have  to  get  in  line  and  wait  their  turn  in  order  to  get  the  privilege  of 
subscribing  to  the  government  service,  and  who,  so  valuable  has  be- 
come the  right  to  the  first  positions  in  the  line,  are  trading  these  rights 
to  subscribe  for  telephone  service  on  the  stock  exchange  and,  in  some 
cases,  bequeathing  them  as  valuable  assets  in  their  wills.  For  you  see, 
Japan  has  no  money  at  present  for  telephones ;  she  needs  battleships — 
battleships  come  first  in  Japan.  But  as  I  say,  despite  all  this  prepared- 
ness of  the  telephone  in  this  country,  and  the  fact  that  we  have  attended 
to  telephone  needs,  present  and  future,  to  a  far  greater  extent  than  has 
been  possible  under  the  foreign  governmental  systems,  the  plant  of  the 
Bell  System,  the  American  Telephone  and  Telegraph  Company  and  its 
subsidiaries,  including  long  distance  lines,  stands  us  to-day  at  $153  per 
station.  Australia  stands  at  $163  per  station — $10  higher;  Germany, 
$178— $25  higher;  Switzerland,  $192— $40  higher;  Hungary,  $193— 
$40  higher ;  Austria,  $213— $60  higher ;  France,  $253— $100  higher,  and 
Belgium,  $278— $125  higher.  Not  so  bad,  Mr.  Lewis,  for  the  efficiency 
of  private  enterprise. 

Some  Exchange  Rate  Comparisons 

Now,  Mr.  Lewis  has  had  quite  a  bit  to  say  about  telephone  rates. 
The  question  of  rates  is  one  of  the  most  involved  and  technical  in  con- 
nection with  the  telephone  business.  I  have  already  shown  you  how  the 
public  has  dealt  with  the  telephone  in  regard  to  rates,  through  public 
service  regulation,  and  the  stand  we  have  taken  on  the  subject.  We 

13 


9 

are  willing,  at  any  and  all  times,  to  change  our  rates  to  conform  to  any 
basis  demonstrated  by  investigation  to  be  more  reasonable  than  the 
present.  We  are  just  as  interested  in  a  proper  solution  of  this  question 
as  any  one,  and  I  submit  that  I  have  made  it  clear  that,  so  far  as  in- 
vestigation has  shown,  rates  in  this  country  are  as  they  should  be.  But 
now  what  sort  of  rate  comparisons  have  been  made  with  foreign  coun- 
tries ?  Well,  some  of  the  rate  statistics  used  by  Mr.  Lewis  came  from 
a  source  pretty  badly  tainted.  I  think  he  knows  what  I  mean.  And 
a  favorite  method  of  making  comparisons  is  to  take  a  big  city,  say  like 
New  York,  and  take  your  maximum  business  measured  rate,  and  then 
stick  that  up  on  your  flag  and  wave  it  around  as  the  New  York  rate, 
and  compare  that  rate  with  the  smallest  possible  rate  in  other  cities, 
and  then  talk  about  extortionate  and  unfair  rates.  Now  what  is  the  use 
of  comparing  rates  this  way  ?  It  is  not  fair ;  it  is  not  honest,  because 
the  idea  is  not,  What  is  the  rate  for  one  particular  kind  of  service? 
but,  What  do  the  people  of  that  city  pay  for  telephone  service?  You 
have  got  to  take  into  account  not  only  the  size  of  the  exchanges,  but 
the  number  of  subscribers  using  the  service,  and  above  all  the  average 
rate  paid.  And  if  you  do  that,  you  find  some  such  comparisons  as  these : 

The  minimum  rate  in  The  Hague  is  $24.  In  San  Antonio,  Texas, 
an  exchange  of  about  the  same  size,  it  is  $18.  78%  of  the  San  Antonio 
subscribers  pay  not  more  than  the  minimum  rate  in  The  Hague,  and 
most  of  them  pay  less. 

The  Omaha,  Nebraska,  exchange  has  about  the  same  number  of 
subscribers  as  Tokio  (you  will  remember  Tokio).  79%  of  the  sub- 
scribers pay  less  than  the  minimum  rate  in  Tokio. 

Amsterdam,  Holland,  has  about  the  same  number  of  subscribers 
as  Rochester,  New  York.  77%  of  the  Rochester  subscribers  pay  less 
than  the  minimum  rate  in  Amsterdam. 

Rotterdam  has  about  the  same  number  of  subscribers  as  St.  Joseph, 
Missouri.  81%  of  the  St.  Joseph  subscribers  pay  less  than  the  mini- 
mum rate  available  in  Rotterdam. 

Budapest  has  about  the  same  number  of  subscribers  as  St.  Paul, 
Minnesota.  94%  of  the  St.  Paul  subscribers  pay  less  than  the  only 
rate  available  in  Budapest. 

Now  Paris  has  been  mentioned  and  compared,  for  example,  with 
New  York  City,  an  exchange  about  five  times  as  big,  and,  of  course, 
the  $228  rate,  the  highest  possible,  was  picked  out  for  New  York.  It 
doesn't  matter  that  only  %  to  %  of  1%  pay  the  rate  quoted  or  more, 
or  it  would  not  matter  if  nobody  paid  the  rate  quoted — use  it  just  the 
same,  because  it  sounds  bad  for  the  Bell.  Well,  now,  suppose  we 
compare  Paris  with  New  York.  The  only  rate  available  in  Paris  is 
$77.20 — and  don't  forget  you  have  got  to  buy  your  instrument  in 
addition.  79%  of  the  subscribers  in  New  York  City  pay  less  than  the 
Paris  rate.  90%  of  the  Philadelphia  subscribers,  and  91%  of  the 
Chicago  subscribers  pay  less  than  the  only  rate  available  in  Paris. 

Now  if  you  get  down  to  the  smaller  places  of  this  country  and 
abroad,  you  would  find  practically  no  comparison.  The  foreign  rates 
are,  as  you  will  see  if  you  look  into  that  study  that  I  have  men- 
tioned to  you  before,  for  the  smaller  places,  much  higher  than  the 

14 


corresponding  rates  in  this  country.  In  fact,  they  are  abroad,  in  many 
cases,  practically  prohibitive,  which  explains  the  impoverished  rural 
telephone  development  in  the  foreign  countries  which  have  govern- 
ment telephone  systems/ 

Unfairness  of  Price  Comparisons  Without  Considering  Quality 

Now,  of  course,  I  have  not  told  you  the  whole  story  in  rate  com- 
parisons. What  good  are  rate  comparisons  if  you  do  not  consider  what 
you  get  for  your  money?  I  am  not  talking  now  about  the  quality  of 
service,  which,  as  anyone  knows  who  has  traveled  abroad,  is  for  the 
most  part  much  inferior  to  American  telephone  service.  I  am  talking 
now  about  the  length  of  hours  during  which  the  telephone  service  is 
available  to  the  public  abroad.  Take  Switzerland,  for  example — the 
country  with  which  Mr.  Lewis  is  so  in  love  for  statistical  purposes. 
96%  of  the  exchanges  in  Switzerland  close  at  9  o'clock  P.  M.  46% 
operate  from  7  A.  M.  to  noon;  then  close  two  hours  for  lunch;  then 
open  again  until  6  P.  M. ;  then  close  two  hours  for  tea ;  then,  to  show 
that  they  are  not  so  bad  after  all,  they  open  at  8  and  stay  open  until 
8 :30  P.  M.,  then  put  up  the  shutters  for  the  night.  I  am  afraid  Provi- 
dence would  not  stand  for  that  kind  of  "public  service  motive." 

Or  take  New  Zealand,  where  the  Government  has  reduced  things 
to  so  beautiful  a  basis,  and  where,  incidentally,  they  have  a  debt  rate 
of  about  $400  per  capita ;  84%  of  all  their  telephone  exchanges  are  not 
open  on  Sundays ;  80%  are  not  open  on  holidays ;  and  60%  are  open 
on  week  days  only  from  9  A.  M.  to  5  P.  M. 

In  Belgium,  with  rates  averaging  $10  higher  than  the  Bell  Sys- 
tem, for  comparable  towns — in  what  is  known  as  the  Brussels  Group, 
which  includes  the  City  of  Brussels  and  environs,  and  contains  more 
than  one-third  of  all  the  telephones  in  the  country — out  of  a  total  of 
23  offices,  21  operate  only  from  7  A.  M.  to  9  P.  M.,  and  but  two  of  them 
operate  day  and  night. 

Plaintive  Appeals  from  Germany 

Or  listen  to  this  sad  plaint  from  one  of  the  official  representatives 
in  Germany,  Herr  Wendel,  in  his  speech  in  the  Reichstag,  in  February, 
1913: 

"I  cannot  forego  to  speak  here  about  the  wish  expressed  by  one  of  our 
Electoral  Districts.  I  refer  here  to  Freiburg.  There  the  entire  telephone  serv- 
ice is  interrupted  at  9  o'clock  P.  M.  Five  minutes  after  9  o'clock  it  is  impos- 
sible to  obtain  a  telephone  connection.  Now  the  Town  Council  of  Freiburg 
has  addressed  the  Postal  Administration  and  asked  for  the  introduction  of 
night  telephone  service.  The  Postal  Administration  has  refused  the  request. 
It  is  true  that  Freiburg  is  a  very  pretty,  idyllic,  and  quiet  town,  and  I  am  glad 
of  it ;  moreover,  the  night  is  not  man's  friend.  I  admit  this ;  but  it  must  also 
be  remembered  that  not  all  citizens  of  Freiburg  go  to  roost  with  the  chickens, 
and  a  sudden  sickness,  accident,  fire — any  kind  of  trouble — may  require  a  quick 
telephone  call  for  a  physician,  or  a  fire  brigade,  just  as  much  after  9  o'clock 
P.  M.  as  prior  to  that  time.  It  seems  to  me  indefensible  that  a  city  of  some 
30,000  inhabitants  should  be  deprived  of  telephone  service  at  9  P.  M.,  and  it  is 
the  duty  of  the  Postal  Administration  to  get  quickly  in  touch  with  the  Postal 
Direction  of  Freiburg  or  the  Upper  Postal  Direction  of  Dresden,  in  order  that 
this  justifiable  request  of  the  inhabitants  may  be  granted." 

15 


And  when  the  telephone  subscribers  of  Germany  became  so  unrea- 
sonable as  to  expect  telephone  service  during  lunch  hours,  here  is  the 
assurance  they  received  from  the  Secretary  of  the  Imperial  Postal 
Administration,  who  is  in  charge  of  the  service : 

"I  have  listened  to  the  wish  that  our  telephone  exchanges  should  also  be 
kept  open  during  the  noon  hours.  I  wish  to  state  that  the  various  authorities 
have  been  instructed  to  exert  themselves  along  this  line.  In  accordance  with 
the  reports  which  are  before  me,  I  can  state  that  70  per  cent,  of  all  our  tele- 
phone exchanges  give  service  between  12  A.  M.  and  1  P.  M." 

Toll  Rate  Comparisons 

Now  about  toll  rates.  Our  plant  in  this  country  is  built  and  oper- 
ated on  the  "No  delay"  basis.  Our  rates  in  this  country  cover  the  best 
service  only — we  have  no  different  kinds  of  service  as  they  have  abroad. 
Abroad  they  classify  rates  as  "urgent"  and  "ordinary."  By  "urgent" 
they  mean  something  like  the  long  distance  service  we  give  in  this 
country,  and  for  which  they  charge  from  two  to  three  times  as  much 
as  the  regular  rate  which  Mr.  Lewis  quoted.  We  have  only  one  kind  of 
long  distance  telephone  service,  and  that  is  the  best  that  we  know  how 
to  give.  This  "ordinary"  telephone  service  in  foreign  countries  is 
funny.  Say  you  live  in  Germany:  If  you  want  to  talk  with  a  friend, 
you  get  an  assignment.  They  tell  you  you  can  talk  with  him  at  10 
o'clock — perhaps  that  day,  perhaps  the  next  day,  if  the  appointments 
are  all  taken  up.  It  is  put  up  for  you  at  ten.  If  you  are  not  there  to 
talk,  you  are  charged.  If  you  are  there,  you  talk  three  minutes;  then 
you  are  cut  off,  and  you  cannot  talk  again  until  your  turn  comes  around 
again. 

And  then,  in  foreign  countries,  they  have  another  difference,  a 
vastly  important  one,  between  their  method  of  charging  and  our  meth- 
od of  charging  here  in  this  country.  Our  rates,  except  as  to  nearby 
points,  are  got  up  on  what  is  known  as  the  "particular  person"  basis. 
In  other  words,  if  you  want  a  long  distance  call,  except  to  nearby 
points,  you  are  charged  only  if  you  get  the  party  you  want.  This  is  not 
true  of  the  foreign  government  telephone  systems.  They  have  there 
what  is  known  as  the  "two  number"  basis — that  is,  they  give  you  the 
connection,  you  do  the  talking — if  you  can — and  whether  you  talk  to 
the  party  you  want,  or  the  office  boy,  or  the  janitor,  or  the  stenographer, 
or  to  no  one  at  all,  they  charge  you,  because  they  have  given  you  the 
connection.  They  sell  you  the  connection,  but  they  do  not  guarantee 
to  sell  you  the  conversation  you  want. 

Peculiar  Comparisons 

And  here's  another  point  about  the  rate  comparison  Mr.  Lewis  has 
made.  Unfortunately,  the  gentlemen  who  prepared  the  table  for  Mr. 
Lewis  took  the  one-hundred-mile  rate  as  the  magic  point,  and  then  pro- 
ceeded to  show  up  some  beautiful  discrepancies  between  our  rates  for 
long  distance  telephone  service,  and  the  corresponding  rates  abroad. 
Well,  now,  it  is  a  fact  that  70%  to  80%  of  all  toll  traffic  moves  within 
a  radius  of  from  30  to  50  miles,  and  within  this  radius  it  is  found  that 

16 


our  toll  rates  are,  even  on  a  nominal  basis,  taking  into  account  the  dif- 
ferences I  have  mentioned,  lower  than  in  Europe,  and  if  you  consider 
the  international  toll  conversations  in  Europe,  of  which  there  are  many, 
and  which  Mr.  Lewis  completely  ignored,  you  find  that  the  foreign 
rates  are  from  three  to  four  times  as  high  as  the  rates  in  this  country 
for  corresponding  distances.  Now  when  you  get  out  into  much  longer 
distances,  I  grant  you  that  the  European  systems  can  quote  much  lower 
rates  for  the  service,  because  they  know  no  one  will  call  their  bluff.  The 
service  is  not  a  commercial  service,  and  even  if  some  one  should  take 
them  up,  they  could  afford  to  charge  almost  nothing  for  the  rare  conver- 
sation for  long  distances  if  they  could  charge  three  or  four  times  as 
much  for  the  short  distances  where  the  bulk  of  the  traffic  falls.  In 
European  countries  they  have  the  magnanimity  to  make  a  very  cheap 
rate  which  covers  long  and  short  distances,  and  you  get  the  short  occa- 
sionally, but  you  never  get  the  long.  It  is  true  that  to  distant  points  our 
rates  are  higher,  but  we  quote  rates  for  a  commercial  service,  and  we 
have  done  a  remarkable  thing  in  this  country  which  they  cannot  do  in 
European  countries;  we  have  let  the  telegraph  take  its  natural  place. 
We  realize  that  for  short  distances  the  telegraph  cannot  compare  for 
direct  utility  with  the  telephone  service,  and  that  for  long  distances  the 
telegraph  cannot  be  approached  for  economy  by  the  telephone,  because 
of  the  terrific  cost  of  tying  up  lines.  When  you  have  a  property  costing 
several  hundred  thousand  dollars,  you  must  quote  a  rate  which  bears 
some  proportion  to  the  cost  of  furnishing  the  service.  But  we  have  an- 
other means  in  this  country  of  taking  care  of  this  kind  of  traffic — a 
thing  I  want  particularly  to  call  to  Mr.  Lewis'  attention:  We  do  not 
simply  sit  down  and  say  we  cannot  give  a  man  a  cheap  rate  for  long  dis- 
tances and  let  it  go  at  that,  but  we  have  these  lines  that  are  used  for 
long  distances,  and  we  lease  them  to  people  who  will  guarantee  a  fairly 
continuous  service,  or  who  will  take  the  service  for  a  half -hour  or  an 
hour  a  day,  and  we  quote  rates  that  will  move  traffic.  The  American 
Telephone  and  Telegraph  Company  has,  tied  up,  214,000  miles  of  line 
under  lease.  Now,  Mr.  Lewis,  what  have  you  done  with  these  lines? 
You  have  not  counted  one  message  on  them.  I  dare  say  you  do  not 
know  they  exist.  We  do  not  parade  them ;  we  saw  no  need  of  parading 
them ;  we  did  not  need  to  make  any  defense  of  our  efficiency,  etc.,  until 
you  came  along  with  your  example  of  the  Norwegians  and  the  Luxem- 
burgers,  but  just  the  same,  we  keep  that  plant  in  repair,  we  furnish  the 
wires,  we  maintain  the  plant,  but  we  get  no  credit  for  it  in  your  show- 
ing of  efficiency.  We  are  interested  solely  in  giving  service ;  and  if  we 
give  the  service,  we  are  satisfied  to  let  it  go  at  that. 

Europe  an  Armed  Camp 

Now,  Mr.  Lewis  was  kind  enough,  in  his  remarks  in  Congress, 
to  make  a  statement  that,  I  think,  goes  far  to  explain  the  situation. 
European  governments  never  took  over  the  telephone  because  they 
could  do  the  job  better;  on  the  contrary,  the  people  who  were  running 
the  telephone  service  were  doing  the  job  so  well  that  if  the  govern- 
ments had  not  taken  the  service  over,  and  stopped  competition  with  the 

17 


telegraph  service  which  the  governments  had  from  the  start,  they  would 
have  gone  bankrupt,  and  Mr.  Lewis  knows  that  that  is  true.  We 
know  that  Europe  is  one  armed  military  camp ;  we  know  that  when  the 
telegraph  came  in  under  the  Governments  in  Europe,  it  was  not  as  a 
commercial  service,  but  as  a  military  agency.  For  the  European  Gov- 
ernments, the  one  overwhelming  purpose  is  military  necessity  and  pro- 
tection. Now  we  have  not  this  situation  here.  Our  country,  fortu- 
nately, is  not  an  armed  camp. 

Prof.  Holcombe's  Caution 

One  other  thing  about  the  statistics  that  Mr.  Lewis  has  used.  Mr. 
Lewis  has  mentioned  Professor  Holcombe's  book  on  telephones  in 
such  a  way  as  to  lead  one  to  believe  that  Professor  Holcombe  and  Mr. 
Lewis  are  in  accord  on  the  foreign  telephone  statistics  which  Mr. 
Lewis  has  used.  Let  me  quote  you  this  from  Chapter  23,  Page  420,  of 
Professor  Holcombe's  book  on  "Public  Ownership  of  Telephones" : 

"'A  judicious  man/  says  Carlyle's  'crabbed  satirist,'  'looks  at  Statistics, 
not  to  get  knowledge,  but  to  save  himself  from  having  ignorance  foisted  upon 
him'  Statistics  have  improved  somewhat  since  Carlyle's  day.  Those  published 
by  the  International  Bureau  of  Telegraph  Administrations  at  Berne,  Switzer- 
land, are  carefully  compiled  and  edited.  Yet  they  are  no  better  than  their 
source,  the  reports  of  the  various  governmental  administrations.  A  judicious 
man  will  still  be  careful  what  he  tries  to  prove  by  them." 

And  while  we  are  on  the  subject  of  toll  rates,  I  want  to  remind 
you  that  in  many  of  the  countries  abroad,  the  governments  refused  ab- 
solutely to  build  toll  lines  until  the  returns  on  these  lines  were  guar- 
anteed by  the  local  authorities  in  the  cities  and  villages  through  which 
the  lines  were  to  be  constructed,  so  that,  in  many  cases,  the  toll  rates 
charged  by  the  governments  do  not  represent  the  actual  charges,  but 
have  been  supplemented  by  the  guarantees  required  by  the  authorities. 
For  instance,  I  wonder  if  Mr.  Lewis  has  seen  this  in  Professor  Hol- 
combe's book  with  regard  to  Switzerland : 

"After  another  five  years  of  more  or  less  constant  negotiations  with  the 
commercial  interests  north  of  the  Alps,  they  undertook  to  give  on  their  own 
sole  responsibility  the  required  guarantee.  In  1900,  a  line  was  opened  between 
Lugano  and  Zurich,  and  a  second  between  Bellinzona  and  Lucerne. 

"During  the  first  year  after  their  opening,  the  traffic  over  these  two  lines 
averaged  only  thirteen  messages  a  day.  Consequently,  the  receipts  amounted 
only  to  a  bare  third  of  the  guaranteed  income,  and  the  real  cost  of  the  connec- 
tion to  the  interests  which  had  demanded  it  was  nearly  thrice  the  nominal  rate. 
Yet  the  guarantee  did  not  suffice  to  cover  the  costs  to  the  administration,  for 
the  construction  over  the  Alps  proved  to  be  exceptionally  expensive." 

The  same  condition  prevails  in  France,  where  the  actual  financ- 
ing of  the  long  distance  telephone  lines  had  to  be  undertaken  by  local 
authorities,  and  sometimes  by  the  private  interests  in  these  localities,  in 
addition  to  the  guarantees  which  were  required  in  return  for  the  in- 
vestment. That  is  one  of  the  ways  that  the  foreign  government  tele- 
phone systems  (operating,  no  doubt,  in  response  to  Mr.  Lewis'  law  of 
"public  service  motive")  discouraged  the  building  of  lines  to  what  they 
thought  might  not  be  profitable  sections. 

18 


Toll  Line  Delays  Abroad 

Now  then,  after  all  I  have  said  about  telephone  toll  rates,  what 
kind  of  service  do  you  get  for  your  money?  I  wish  I  had  time  to  give 
you  some  adequate  indication  of  the  almost  universal  dissatisfaction 
in  Europe  with  the  kind  of  toll  service  that  the  governments  furnish. 
I  will  mention  one  or  two  instances — I  am  not  exaggerating  these  in 
the  slightest — I  am  going  to  quote  to  you  from  official  sources.  Here, 
for  instance,  is  a  quotation  from  the  speech  of  Herr  Haberland  of  the 
German  Reichstag: 

"Thus,  complaint  is  made  of  the  long  time  that  a  subscriber  must  wait  in 
order  to  get  long  distance  connections,  especially  connections  between  the  West 
and  the  more  central  parts  of  the  country,  and  in  particular  between  Dussel- 
dorf  and  Berlin.  For  years  the  Imperial  Post  Office  has  been  acquainted  with 
these  complaints.  In  1907  the  Dusseldorf  Chamber  of  Commerce  made  an  in- 
vestigation and  found  that  the  waiting  time  exceeded  two  hours.  In  1910  it 
was  proved  that  the  average  time  of  waiting  to  be  connected  by  telephone  serv- 
ice between  Dusseldorf  and  Berlin  (about  400  miles)  was  still  over  one  hour, 
and  the  average  time  between  Dusseldorf  and  Mannheim,  Dortmund,  and 
Cologne  was  forty-four,  thirty-nine  and  thirty-four  minutes  respectively. 
Later,  conditions  again  grew  worse.  The  average  time  required  to  get  a  con- 
nection with  Berlin  is  now  one  and  one-half  hours.  According  to  reports  from 
a  number  of  firms,  if  the  operator  be  requested  to  get  Berlin,  the  general  reply 
is  that  unless  the  conversation  is  classified  as  'Urgent/  the  connection  will  take 
several  hours.  In  fact,  the  Administration  recommends  a  scheme  of  'Urgent' 
conversations  to  overcome  the  trouble.  This  remedy,  however,  is  often  too  ex- 
pensive for  the  less  wealthy  concerns,  and,  furthermore,  it  is  to  be  remembered 
that  this  forced  increase  in  urgent  conversations  tends  to  make  the  waiting- 
time  still  longer  in  the  case  of  ordinary  conversations." 

The  toll  service  in  France  is  even  more  ridiculous.  I  quote  from 
a  few  of  the  many  complaints  of  the  French  Chambers  of  Commerce: 

Chamber  of  Commerce  of  Alms  (population  25,000): 

"As  regards  telephone  communications,  for  example,  several  establish- 
ments have  indicated  that  it  has  been  impossible  to  obtain  connections  with 
Marseilles  (85  miles)  and  Lyons  (115  miles),  even  after  waiting  four  hours." 
Chamber  of  Commerce  of  Rouen  (population  125,000): 

"We  place  in  the  first  rank  the  reforms  which  we  wish  for  the  improve- 
ment of  the  telegraph  service,  and  especially  in  the  telephone  service  which 
leaves  much  to  be  desired.    It  takes  an  average  of  55  minutes  to  secure  a  con- 
nection with  Paris   (70  miles)." 
Chamber  of  Commerce  of  Chambery  (population  23,000): 

"Telephone  communications  with  Geneva  (50  miles),  Lyons  (60  miles), 
Paris  (280  miles),  Grenoble  (30  miles),  are  practically  impossible  during  the 
greater  part  of  the  year,  and  it  is  necessary  to  wait  hours  for  a  connection.  In 
the  case  of  Paris  one  gets  the  connection  the  day  after  the  call  has  been  filed." 

In  other  words,  if  you  live  in  Paris,  and  happen  to  be  detained  in 
Chambery,  you  call  your  home  to-day,  you  get  it  to-morrow,  and  you 
tell  your  wife  that  you  won't  be  home  last  night.  Why,  Aviator  Gilbert 
recently  flew  in  an  aeroplane  from  Paris  to  Rheims,  one  hundred  miles, 
and  he  arrived  at  his  destination  before  the  news  of  his  departure  could 
be  telephoned. 

Peculiar,  if  not  Questionable,  Methods  of  Showing  Toll  Efficiency 

Now,  despite  this  situation,  and  it  is  a  serious  one,  and  I  have  a  lot 
of  friends  who  could  interest  you  and  give  you  instances  much  more 

19 


ludicrous  than  those  I  have  read — I  say,  despite  all  this,  Mr.  Lewis  has 
worked  up  figures  showing  a  higher  efficiency  for  foreign  countries  than 
for  the  telephone  in  this  country.  If  the  people  of  this  country  would 
only  wait,  would  only  take  their  turn,  would  file  your  message,  and  wait 
for  your  chance  to  talk,  we  could  build  up  a  showing  of  "efficiency" 
that  would  tickle  the  heart  of  Mr.  Lewis,  by  putting  up  just  enough 
circuits  to  carry  the  messages  filed  in  a  day.  We  would  not  have  to  use 
so  much  copper,  we  would  not  have  to  use  so  much  equipment,  and  we 
could  economize  wonderfully  on  the  number  of  people  we  have  to  em- 
ploy. But  do  the  people  want  that  kind  of  service?  Mr.  Lewis,  in  his 
comparison  of  what  he  calls  "adequacy"  of  telephone  facilities,  made  a 
great  showing  for  foreign  countries  by  simply  dividing  the  number  of 
messages  from  toll  terminals  by  the  number  of  telephone  stations. 
Well,  just  see  how  ridiculous  such  a  comparison  is!  If  we  were  to 
come  to  Providence  to-day  and  cut  down  the  number  of  telephones  by, 
say  four,  so  that  we  had  only  one-fourth  of  all  the  telephones  here  that 
you  have  now,  we  know  we  would  lose  some  long  distance  business,  but 
think  what  a  wonderful  quotient  you  would  get  for  long  distance  mes- 
sages per  phone !  For  Mr.  Lewis'  statistical  purposes,  your  town  would 
be  ideal,  but  I  am  frank  to  say  that,  for  telephone  purposes  it  wouldn't 
be  much.  Now,  it  is  this  very  fact  that  shows  our  superior  develop- 
ment in  this  country.  People  do  not  have  to  leave  their  homes  to  tele- 
phone. Suppose  you  put  an  extension  station  upstairs  in  your  home. 
Originally,  with  one  telephone  in  your  home,  you  had  ten  calls  a  day ; 
with  your  extension  station,  you  may  have  a  total  of  twelve  calls  a  day. 
Before  you  put  in  your  extra  station  your  quotient  of  "adequacy"  was 
ten ;  after  you  put  in  your  extra  telephone,  it  became  only  six ;  so  that, 
according  to  Mr.  Lewis,  your  facilities  have  become  approximately  one- 
half  as  efficient  as  they  were  before.  Now,  what  is  the  sense  of  punish- 
ing us  by  this  kind  of  comparison  ?  We  don't  want  to  stop  growing  in 
order  to  show  that  brand  of  "efficiency." 

Special  Service  Ignored  by  Mr.  Lewis 

I  mentioned  before  our  enormous  carrying  business  on  leased  lines. 
Well,  we  have  gone  further  than  that,  we  have  got  tie  lines.  New 
York  City  is  full  of  them.  We  lease  you  a  line  from  your  factory  to 
your  office,  and  you  handle  the  traffic  between  such  places  more  effi- 
ciently; we  do  all  the  maintaining,  etc.  We  have  got  thousands  and 
thousands  of  these  lines  in  this  country,  and  for  that  traffic  we  get  no 
credit  in  statistical  showing,  and  we  want  none;  we  are  satisfied  that 
that  is  good  efficient  engineering.  But  these  things  have  got  to  be  con- 
sidered by  any  student  who  wants  to  arrive  at  a  proper  conclusion. 

More  Niggers  in  the  Woodpile 

I  am  not  going  to  take  up  in  detail  all  the  "niggers"  in  that  exten- 
sive woodpile  of  statistics  presented  by  Mr.  Lewis.  And  these  "nig- 
gers" are  wonderfully  numerous.  For  instance,  in  counting  toll  mes- 
sages, the  figures  used  by  Mr.  Lewis  have  been  frightfully  inflated. 
Many  of  these  messages,  for  instance,  are  counted  twice  and  three 

20 


times,  as,  for  instance,  international  messages.  They  are  counted  in 
the  country  where  they  originate,  in  the  country  where  they  terminate, 
and  if  they  pass  through  more  countries,  they  are  counted  in  all  the 
countries  they  pass  through.  The  next  time  Mr.  Lewis  makes  up  a 
report  on  this  situation,  he  might  look  into  that.  Of  course,  we  haven't 
got  that  kind  of  proposition  in  this  country.  We  have  here  enough  of 
a  job  getting  one  toll  message  counted  once.  And  then,  again,  in  many 
cases,  Mr.  Lewis'  toll  messages  aren't  toll  messages  at  all ;  for  instance, 
in  Germany,  Mr.  Lewis  has  used  a  large  number  of  messages  as  toll 
messages  which  are  only,  as  we  are  advised  by  the  German  Govern- 
ment, a  species  of  no-charge  suburban  trunk  calls,  and  the  number  of 
these  improperly  included  messages  for  Germany  alone  is  greater  than 
the  total  number  of  toll  messages  in  the  United  States. 

Private  Ownership  the  Cause,  not  the  Effect,  of  our  Prosperity 

But  I  am  not  going  to  bother  with  all  this.  After  all,  you  know 
that  the  best  test  of  efficiency  and  rates  is  the  relative  development  of 
the  service,  and  you  know  how  that  has  worked  out.  But  Mr.  Lewis 
didn't  like  these  facts,  they  didn't  fit  in  with  his  theory  of  public  serv- 
ice motive  and  the  law  of  diminishing  returns.  So  he  said  the  figures 
didn't  mean  anything.  He  said  that  our  superior  development  was 
not  due  to  superior  efficiency  and  better  rate  schedules,  but  was  simply 
due  to  our  prosperity.  Now,  isn't  that  putting  the  cart  before  the 
horse  ?  Is  it  not  true  that  our  magnificent  prosperity  is  due  precisely  to 
the  manner  in  which  he  have  handled  our  affairs  ?  I  have  gone  down  to 
the  Battery  in  New  York  City  many  times,  and  watched  the  immi- 
grants come  in,  clad  in  their  quaint  garments  and  carrying  their  old 
carpet  bags,  and  I  have  watched  them  open  their  eyes  in  wonder,  and 
I  thought  I  could  see  in  many  of  them  our  future  police  officers  and 
our  car  line  conductors,  and  our  operators.  Why,  in  Buffalo  they  have 
hired  a  girl  to  lecture  to  us  in  one  of  our  public  demonstrations  of  the 
telephone.  She  was  an  Italian  girl  who  came  over  to  this  country  with- 
in the  last  few  years.  Her  mother  and  father  still  wear  the  quaint 
foreign  clothes  of  Italian  custom.  She  was  picked  out  of  our  operating 
rooms  because  she  had  the  most  perfect  English  enunciation  of  any 
girl  there,  and  she  is  now  illustrating,  in  her  rich  Italian  voice,  the 
proper  way  to  use  the  English  tongue.  That  little  instance  meant  much 
to  me;  it  was  only  an  illustration  of  the  extent  to  which  opportunity 
in  this  country  has  spelled  our  wonderful  success.  Why,  it  is  precisely 
because  of  our  methods  of  railroad  building,  trolley,  electric  light  and 
other  developments,  and  the  development  of  our  magnificent  telephone, 
which  has  spread  itself  throughout  the  country,  that  we  have  prosperity 
in  this  country.  I  say  our  development  of  the  telephone  and  other  en- 
terprises has  antedated  and  been  the  cause  of  our  prosperity  in  this 
country.  No,  indeed,  Mr.  Lewis  cannot  explain  away  the  situation. 
Our  superior  telephone  development  is  a  fact,  and  can  be  accounted 
for  only  by  the  way  we  have  handled  it.  For  see,  suppose  you  go  to 
Europe  and  take  the  countries  where  the  telephone  is  in  private  hands. 
See  what  has  been  done  in  that  little  European  country  of  Denmark, 

21 


where  most  of  the  telephone  development  is  private.  In  Denmark  they 
have  twice  as  many  telephones  per  one  hundred  inhabitants  as  in  Ger- 
many, 2^  times  as  many  as  in  Great  Britain,  3  times  as  many  as 
in  the  Netherlands,  5  times  as  many  as  in  Belgium,  and  6  times  as 
many  as  in  France.  Sweden  and  Norway,  which  have  some  private 
operation,  but  not  as  much  as  Denmark,  rank  next,  and  in  the  city  of 
Stockholm  alone,  which  is  mostly  private,  they  have  a  larger  telephone 
development  than  in  any  other  city  of  the  world,  with  the  exception  of 
San  Francisco. 


Opportunities  Abroad 

Why,  gentlemen,  the  starved  condition  of  telephone  development 
in  the  European  countries,  where  the  governments  operate  the  service, 
would  offer  to  American  telephone  enterprise  a  most  wonderful  field ! 
They  have  not  in  Europe  the  disadvantages  we  have  here;  they  have 
towns  thickly  settled ;  they  have  not  the  vast  distances  that  we  have  to 
contend  with ;  they  have  greater  possibilities  of  producing  a  full  volume 
of  traffic,  and  yet,  see  where  they  have  landed  under  government  man- 
agement. It  was  probably  this  which  Major  O'Meara,  the  Government 
Consulting  Engineer  in  Great  Britain,  had  in  mind  when  he  wrote  to 
us  recently,  acknowledging  a  copy  of  Mr.  Vail's  annual  report.  Here 
is  what  he  says : 

"I  am  writing  to  thank  you  for  the  copy  of  the  Annual  Report  of  the  Di- 
rectors of  the  American  Telephone  &  Telegraph  Company  for  1913.  I  have 
been  much  interested  in  the  part  of  the  report  dealing  with  Government  Own- 
ership and  Operation.  After  spending  over  sixteen  years  out  of  my  thirty-two 
years  public  service  in  the  British  Post  Office  Department  I  have  come  definitely 
to  the  conclusion  that  a  Government  Department  is,  as- a  rule,  an  unsuitable 
organization  to  manage  services  of  the  character  of  the  telegraphs  and  tele- 
phones. And  the  people  in  this  country  have  been  finding  this  out  for  them- 
selves during  the  past  two  years." 


Is  the  Post  Office  Department  Really  Efficient? 

Now  I  approach  that  part  of  the  subject  that  is  not  very  pleasant 
to  me,  and  that  is  the  question  of  comparing  the  efficiency  of  the  Post 
Office  Department  with  that  of  the  telephone  in  this  country.  We  tele- 
phone people  have  been  busy  in  the  past.  We  have  not  had  much  time 
to  worry  about  whether  or  not  the  Post  Office  Department  was  as  effi- 
cient as  it  should  be.  We  have  been  busy  enough  trying  to  be  as  efficient 
as  we  could.  We  have  appreciated  that  the  Post  Office  was  properly  a 
government  institution,  and  that  part  of  the  burden  of  this  enterprise 
could  very  properly  be  charged  to  general  taxation,  because  it  is  placed 
at  the  disposal  of  all,  and  is  used  by  all  alike,  and,  being  a  matter  of 
common  concern,  it  is  very  properly  a  matter  subject  to  common  sup- 
port. But  now,  when  the  Post  Office  is  used  as  a  criterion  by  which  to 
judge  our  progress,  when,  by  some  mysterious  method  of  computing 
efficiencies  in  these  services,  Mr.  Lewis  has  done  something  that  no- 
body on  earth  has  ever  attempted  to  do,  that  is,  has  not  only  compared 
the  telephone  in  one  country  with  the  telephone  in  another  by  arbitrary 

22 


unit  equivalents,  but  has  compared  the  postal  service  in  this  country 
with  the  utterly  dissimilar  telephone  service  in  this  country, — then,  I 
say,  we  have  to  sit  up  and  take  notice.  Now  the  telephone  fraternity 
does  not  want  to  be  understood  as  criticizing  the  personnel  of  the  Post 
Office  Department  as  such.  On  the  contrary,  there  is  a  bond  of  sym- 
pathy existing  between  the  telephone  officials  and  those  in  the  postal 
service.  The  Post  Office  personnel  has  had  in  the  past,  and  has  now, 
many  good  and  faithful  men.  We  pity  them.  They  have  been  tied  to 
a  post.  They  have  been  "postalized"  for  years — that  is  my  interpreta- 
tion of  "postalization."  Men  come  into  that  service  full  of  ambition 
and  energy,  and  a  keen  desire  to  accomplish,  and  they  find,  before  long, 
that  they  are  up  against  a  stone  wall,  that  they  are  hampered  on  all 
sides  by  restrictions  and  the  rigidity  of  a  system  which  forces  them 
either  to  get  out  or  float  with  the  stream.  Don't  take  my  word  for 
it, — this  is  not  my  opinion.  In  February,  1908,  a  Joint  Commission, 
which  had  been  appointed  by  Congress  to  investigate  the  Business 
Method  of  the  Post  Office  Department,  and  of  which  the  Hon.  John 
A.  Moon,  present  Chairman  of  the  House  Committee  on  Post  Offices 
and  Post  Roads,  was  a  member,  submitted  its  report  to  Congress.  I 
wish  I  had  time  to  read  you  some  of  the  extracts  of  this  report,  as  a 
commentary  on  the  alleged  efficiency  of  the  Post  Office  Department, 
but  I  mention  this,  here,  as  indicating  how  the  defects  of  the  service 
are  not  attributable  to  the  personnel,  but  to  the  system: 

"We  also  desire  to  point  out  that  our  criticisms  are  directed  at  methods, 
and  not  at  individuals.  The  higher  officials,  at  any  rate,  and  the  best  of  the 
staff,  are  keenly  alive  to  the  necessity  of  reforms ;  but  the  service  has  grown 
from  small  beginnings  over  a  long  period  of  years,  hampered  by  restrictive 
laws  which  may  have  been  necessary  in  the  past,  and  may  even  now  be  con- 
sidered necessary  to  some  extent  for  a  government  department,  but  which 
would  render  it  practically  impossible  for  any  private  business  to  survive." 


Initiative  and  Efficiency  Destroyed 

How  thoroughly  the  initiative  and  efficiency  of  the  employee  be- 
come dissolved  into  the  inertia  of  their  surroundings  the  moment  they 
enter  the  Department  is  indicated  in  another  portion  of  this  report : 

"The  work  of  the  Department  and  its  development  is  hindered  all  along 
the  line  by  slavish  adherence  to  old  methods  and  to  precedents  created  in  pre- 
vious years,  and  many  reforms  which  might  otherwise  be  instituted  are  hin- 
dered— if  not  entirely  prevented — by  appeals  to  the  decisions  of  the  Comptrol- 
ler, made,  perhaps,  many  years  ago  under  entirely  different  conditions.  Then, 
again,  the  conservatism  of  Government  officials  is  a  generally  admitted  fact. 
There  is  no  inducement  to  employees  to  suggest  improvements  in  the  service 
for  the  reason  that  if  these  improvements  result  in  greater  efficiency  or  econ- 
omy of  administration  they  will  receive  little  credit;  and,  on  the  other  hand, 
if  new  methods  are  not  successful  they  will  be  charged  with  the  whole  blame. 
Moreover,  to  suggest  improvements  which  will  result  in  economy  is  to  create 
hostility  among  other  members  of  the  organization,  whose  services  may  thereby 
be  rendered  unnecessary.  On  the  other  hand,  a  clerk  who  adheres  to  the  rou- 
tine which  existed  prior  to  his  appointment  will  be  left  undisturbed  and  will 
receive  credit  by  performing  his  duties  with  even  a  slight  degree  of  efficiency 
and  accepting  without  comment  methods  which  have  been  handed  down  from 
earlier  generations." 

23 


Absence  of  Accounting  Methods 

Think  of  it!  Mr.  Lewis  takes  the  Post  Office  Department  and 
constructs  efficiency  statistics,  which  he  compares  with  the  telephone, 
when  this  Joint  Commission,  which  secured  the  services  of  some  of  the 
most  expert  firms  of  accountants  in  this  country,  made  the  following 
statement  in  its  report  to  Congress : 

"Past  experience  had  disclosed  the  lack  of  such  a  central  system  of  ac- 
counts in  the  Post  Office  Department  as  rendered  the  determination  of  the 
cost,  profit,  or  loss  in  connection  with  a  given  line  of  service  impracticable. 
For  more  than  one  hundred  years  the  great  and  stupendous  business  of  the 
Post  Office  Department  has  been  operated  without  being  overhauled  or  looked 
into  from  the  standpoint  of  critical,  expert  scrutiny  of  its  business  methods." 


Lack  of  Cooperation 

The  following  examples,  taken  haphazard  from  this  official  report, 
will  indicate  how  vast  and  deep-seated  have  become  the  accumulated 
defects  of  nearly  a  century  of  mismanagement.  For  instance,  as  to  the 
total  lack  of  standardization  in  methods  and  co-operation  between  the 
various  branches  of  the  Department,  the  report  says: 

"In  the  course  of  our  investigation  into  the  main  subject  referred  to,  we 
have  necessarily  had  occasion  to  observe  the  general  methods  of  administra- 
tion throughout  the  Department  and  service  and  have  been  particularly  im- 
pressed with  the  divergencies  therein  in  different  bureaus,  divisions,  and  sec- 
tions in  handling  transactions  of  a  similar  character,  and  we  shall  show  in  this 
report,  how,  under  the  present  system  of  administration,  these  appear  to  have 
grown  up  over  a  long  period  of  years  without  any  very  definite  plan.  There 
exists  an  independence  and  lack  of  co-operation  not  only  between  different 
bureaus  and  different  divisions,  but  even  between  different  sections  of  the  same 
division,  and  in  identical  field  operations  which  must  undoubtedly  do  much  to 
hamper  the  service  and  increase  its  cost." 


Evils  of  Bureaucracy  and  Over-Centralization 

The  Commission  further  calls  attention,  in  the  following  language, 
to  the  effect  upon  efficiency  exercised  by  the  fatal  influence  of  bureau- 
cracy and  over-centralization: 

"Every  request  of  even  the  smallest  post  office,  for  allowances  for  any 
purpose  whatever  has  to  be  made  to  the  headquarters  at  Washington.  Allow- 
ances are,  in  a  large  number  of  cases,  for  amounts  less  than  $1,  and  it  would 
seem  that  if  there  were  a  district  superintendent  in  the  field  who  could  pass 
on  such  matters  it  would  save  a  large  amount  of  routine  work  and  consequent 
expense  in  the  Department  at  Washington.  From  the  fact  that  it  has  to  deal 
with  nearly  65,000  postmasters  scattered  over  a  vast  area  of  territory,  it  cannot 
be  in  a  position  to  determine  intelligently  or  efficiently  upon  the  needs  of  each. 

"The  bureau  chiefs  appear  to  spend  an  increasing  amount  of  their  time  in 
the  mere  routine  work  of  signing  formal  documents  and  passing  upon  requests 
of  various  kinds  for  allowances,  or  otherwise,  which  could  be  intrusted  to 
properly  qualified  officials  in  the  field  without  detriment  to  the  postal  service. 
This  point  recurs  at  every  stage  of  the  inquiry,  and  appears  to  call  for  some 
radical  change  in  administrative  methods  if,  by  the  continual  growth  of  the 
postal  business,  the  Department  is  not  either  to  lose  control  over  the  service 
or  to  exercise  its  control  in  such  a  perfunctory  manner  as  to  make  it  practically 
useless." 

24 


Lack  of  Labor-Saving  Devices 

Indeed,  even  in  the  most  simple  and  rudimentary  requirements  of 
efficient  administration, — -the  use  of  labor-saving  devices, — the  Com- 
mission discloses  a  surprising  condition  in  the  Post  Office  Department, 
calling  attention  to  it  in  the  following  language : 

"There  is  a  lamentable  lack  of  labor-saving  devices  practically  throughout 
the  whole  Department  and  service.  Even  for  such  an  elementary  machine  as 
a  typewriter,  we  are  informed  that  there  are  hundreds  of  applications  on  file 
which  the  Department  has  been  quite  unable  to  fill.  Of  the  more  valuable 
machines,  such  as  arithmometers,  book-typewriters,  and  calculating  machines, 
there  are  few  in  use,  and  even  in  the  field  post  offices  such  scales  as  are  pro- 
vided for  the  special  weighing  of  mails  now  in  progress  are  of  a  very  inferior 
grade,  and  from  the  information  we  have  gathered  it  would  appear  that  with 
few  exceptions  there  are  no  mechanical  conveying  devices  in  any  office  for  ex- 
peditiously  handling  and  weighing  the  mails." 

Lack  of  Efficient  Audit  System 

Examples  of  this  anarchical  condition  of  the  postal  service,  as  dis- 
closed by  the  official  report  of  the  Joint  Commission,  are  numerous,  but 
I  have  not  the  time  to  refer  to  them.  I  could  mention,  for  instance,  the 
reference  the  Commission  makes  to  the  fact  that  there  is  a  complete 
lack  of  any  audit  system  or  any  other  system  which  would  enable  any 
sort  of  check  as  to  efficiency  to  be  made.  The  Commission  says,  for 
instance,  "We  have  seen  in  different  efficiency  statements  of  work 
done,  that  exactly  the  same  class  of  work  done  by  individuals  has  varied 
in  exceptional  cases  from  under  2,000  to  over  22,000  operations  in  the 
same  period  of  time."  And  again,  referring  to  the  accounting  system  in 
this  connection,  "Our  investigation  has  confirmed  the  impression  gath- 
ered from  a  study  of  it,  that  the  whole  of  these  methods  are  crude  in 
the  extreme,  and  such  as  no  private  business  concern  or  corporation 
could  follow  without  the  certainty  of  loss,  if  not  of  financial  disaster." 
And  yet  these  conditions  in  the  postal  service,  which  baffled  the  most 
expert  accountants  of  the  Joint  Commission,  did  not  seem  to  worry 
Mr.  Lewis  at  all,  but  he  blithely  sailed  through  the  whole  gamut  of 
postal  operations,  simply  selected  his  statistics,  and,  out  of  the  nebulous 
cloud  of  unknown  and  unknowable  factors,  he  pulled  forth  a  marvelous 
model  of  efficiency,  to  shame  forever  the  results  of  private  operation. 
It  did  not  matter  that  the  Post  Office  has  no  plant  and  practically  no 
equipment,  except  some  mail  bags,  mail  locks,  mail  boxes,  and  a  few 
other  inconsequentials ;  that  the  Post  Office  Department  assumes  no 
financial  responsibility  for  any  but  a  small  part  of  the  operations  in  the 
discharge  of  postal  functions;  that  even  in  public  buildings,  it  is  the 
tenant  of  the  Treasury  Department,  the  buildings  being  constructed 
and  paid  for  by  appropriations  expended  by  the  Treasury  Depart- 
ment ;  it  did  not  matter  that  no  rentals  are  ever  collected  or  computed ; 
that  the  Post  Office  expenditures  for  heating,  lighting,  repairs,  janitor 
service  and  supplies  are  paid  for,  not  from  postal,  but  from  other  appro- 
priations; that  the  cost  of  the  Post  Office  Department  at  Washington 
and  of  the  Auditor's  office,  embracing  salaries  of  more  than  1,000  offi- 
cials and  employees,  are  paid  from  appropriations  known  as  legisla- 

25 


tive,  executive  and  judicial  services,  never  appearing  in  the  postal  esti- 
mates, accounts  and  balances.  All  Mr.  Lewis  had  to  do  was  to  get  the 
number  of  mail  pieces,  and  take  the  number  of  postal  employees  (and, 
incidentally,  Mr.  Lewis  used  a  figure  for  postal  employees  which  is 
less  by  35,000  than  the  figure  given  by  the  Postmaster  General  three 
years  before  in  his  Annual  Report  for  the  year  1909),  then  divide  your 
mail  pieces  (as  if  you  could  get  an  average  mail  piece)  by  your  em- 
ployees, and  presto!  you  have  your  efficiency.  Now,  with  us,  in  the 
telephone  business,  there  is  no  trouble  about  accounting.  Our  national 
government  knows  very  well  the  need  of  proper  accounting,  and  recog- 
nizes it — so  far  as  we  are  concerned.  The  Interstate  Commerce  Com- 
mission has  prescribed  for  the  Bell  System  a  scheme  of  accounts  as 
complete,  minute  and  elaborate  as  any  to  be  found  within  the  whole 
range  of  scientific  accounting,  and  it  has  kept  us  going  some,  too,  I  can 
tell  you,  to  toe  the  mark. 

Promised  Efficiency  of  Peculiar  Kind 

There  is  just  one  other  point  about  Mr.  Lewis'  scheme  of  efficiency 
that  I  should  like  to  touch  upon,  although  my  time  is  growing  short, 
and  I  can  only  refer  to  it  very  briefly.  That  is  the  great  efficiency  Mr. 
Lewis  is  going  to  get  by  combining  the  telegraph  with  the  postal  serv- 
ice, and  eliminating  all  the  so-called  extra  motions  in  sending  a  tele- 
gram, by  the  simple  use  of  a  postage  stamp.  Now  you  will  find  all  these 
operations  analyzed  in  the  study  that  we  have  prepared,  that  I  men- 
tioned to  you  before,  but  here  is  an  example  of  one  of  the  motions  that 
Mr.  Lewis  is  going  to  cut  out  by  the  use  of  the  postage  stamp.  Under 
the  present  system  of  sending  a  telegram,  the  operator  has  to  put  down 
the  time  of  sending  and  his  initials,  and  the  time  of  receiving  and  his 
initials.  In  fact,  this  operation  is  required  by  law  in  several  States. 
This  is  one  of  the  operations  that,  according  to  Mr.  Lewis,  is  a  useless 
one,  to  be  cut  out  by  the  use  of  a  postage  stamp.  Think  of  it !  Getting 
efficiency  without  knowing  when  your  telegram  has  been  sent,  when  it 
has  been  received,  and  who  sent  it,  and  who  received  it,  in  case  of  delay. 
And  the  Post  Office  system,  which  is  to  work  this  transformation  of 
efficiency — well,  I  guess  you  have  seen  enough  samples  of  the  kind  of 
efficiency  that  the  Post  Office  would  inject  into  the  telegraph  service. 
Why,  in  one  of  the  portions  of  the  Joint  Commission's  report,  we  find 
a  list  of  19  different  operations  which  are  gone  through  for  the  simple 
drawing  of  a  pay  warrant,  not  counting  the  operations  while  it  is  in 
the  hands  of  the  Auditor,  and  these  operations  are  finally  wound  up  by 
an  office  boy,  over  whom  no  supervision  is  exercised. 

Is  the  Parcels  Post  Really  Self -Sustaining? 

Now  Mr.  Lewis,  in  his  talk  about  "public  service  motive,"  dwelt 
upon  the  way  the  parcels  post  has  been  working  out ;  how,  by  the  simple 
injection  of  the  "public  service  motive"  into  the  business,  the  parcels 
post  has  done  a  great  public  work  and,  at  the  same  time,  has  made  a 
neat  little  profit.  Now  all  this  would  be  fine,  if  it  were  only  so,  and  I 

26 


just  want  to  call  Mr.  Lewis'  attention,  and  I  don't  really  need  to,  be- 
cause he  knows  it  himself,  to  the  debates  which  have  taken  place,  not 
so  long  ago,  in  Congress,  on  just  this  very  subject.  Mr.  Lewis  knows 
that  Mr.  Kindel — I  understand  he  professes  to  be  a  deep  and  profound 
student  of  the  parcels  post — has  made  the  statement  that  no  one  to-day 
knows  what  the  parcels  post  costs,  that  no  one  knows  what  it  is  earn- 
ing; and  that  other  distinguished  Congressmen  like  Senator  Joseph 
Bristow,  of  Kansas,  who  was  Chairman  of  the  Senate  Committee  on 
Post  Offices  and  Post  Roads,  which  drafted  the  original  parcels  post 
law,  has  said  that  there  is  no  way  on  earth  of  telling  whether  the  par- 
cels post  is  making  a  profit  or  not.  And  Mr.  Lewis  probably  knows 
that  Mr.  Kindel  complained  to  the  Interstate  Commerce  Commission 
against  the  recent  changes  in  the  parcels  post,  and  that  the  only  answer 
he  got  from  Chairman  Clark,  of  the  Interstate  Commerce  Commis- 
sion, was  that  the  parcels  post  was  in  the  experimental  stage  anyway ; 
and  that,  when  Mr.  Kindel  wanted  to  find  out  from  Postmaster  Gen- 
eral Burleson  something  as  to  the  profit  on  the  parcels  post,  Mr.  Burle- 
son  could  not  furnish  a  single  figure  showing  anything  as  to  the  real 
cost.  So,  either  Mr.  Lewis  is  possessed  of  information  as  to  the  parcels 
post  which  the  people  at  Washington  have  been  vainly  seeking,  or  else 
his  figures  on  the  parcels  post  profits  are  members  of  the  same  family 
as  his  efficiency  statistics. 

Now  I  guess  I  have  said  enough  to  show  you  how  the  situation 
stands  as  to  the  efficiency  of  our  telephones  in  this  country  compared 
with  telephones  abroad,  and  as  to  the  comparisons  which  have  been 
made  between  the  efficiency  of  the  Post  Office  of  this  country  and  of 
our  telephone  system.  I  have  given  you  the  facts,  now  I  will  give  you 
one  or  two  reasons. 

Permanency  of  Plan  and  Purpose  Through  Continuity  of 

Personnel 

In  the  private  telephone  system  of  this  country  we  have  Mr.  Vail, 
who  has  been  with  the  industry  from  its  inception,  being  the  first  Gen- 
eral Manager  of  the  so-called  Bell  System,  and  now  its  head.  Under 
him,  and  holding  important  positions  throughout  the  entire  country, 
are  men  who  have  been  in  the  service  for  years,  as  your  Mr.  Potter, 
Mr.  Howard  and  others,  whose  sole  recommendation  for  advancement 
and  continuance  in  the  service  rests  upon  their  experience  and  fitness 
for  the  positions  they  hold.  Contrast  this  with  the  government-owned 
Post  Office,  if  you  please.  To  quote  again  from  the  findings  of  the 
Joint  Commission: 

"It  appears  too  obvious  to  require  argument  that  the  most  efficient  service 
can  never  be  expected  as  long  as  the  direction  of  the  business  is,  as  at  present, 
intrusted  to  a  Postmaster-General  and  certain  assistants  selected  without  spe- 
cial reference  to  experience  and  qualifications  and  subject  to  frequent  change. 
Before  the  Postmaster-General  and  his  assistants  can  become  reasonably  famil- 
iar with  the  operations  of  the  service  they  are  replaced  by  others,  who,  in  turn, 
are  called  upon  to  resign  before  they  can,  in  the  nature  of  things,  become  quali- 
fied by  knowledge  and  experience  to  perform  their  allotted  task.  Under  such 
a  system  a  large  railroad,  commercial,  or  industrial  business  would  inevitably 
go  into  bankruptcy." 

27 


'  Or,  to  go  one  step  back  of  this — "to  get  behind  the  scenes" — I 
quote  from  a  statement  by  our  friend,  Mr.  Fitzgerald,  Chairman  of  the 
House  Committee  on  Appropriations,  in  a  special  report  appearing  in 
the  "Congressional  Record"  of  January  20,  1914,  wherein  he  said : 

"Under  Republican  administrations  it  had  been  the  custom  for  some  years 
to  appoint  the  chairman  of  the  National  Republican  Committee  Postmaster- 
General,  so  that  there  might  be  no  mistake  as  to  the  partisan  character  of  the 
men  appointed  as  postmasters  in  the  first  and  second  class  postoffices  in  the 
country.  The  abuse  became  so  great  under  Postmaster-General  Hitchcock  and 
Postmaster-General  Cortelyou  that  President  Taft,  a  Republican  President, 
was  compelled  to  cry  out  against  the  existing  conditions  and  to  admit  that  these 
partisans  not  only  did  not  give  their  time  to  the  public  service  for  which  they 
were  paid,  but  that  evidently  he  was  helpless  to  compel  them  to  do  so." 


Post  Office  Troubles  of  Long  Standing 

That  this  condition  is  not  a  recent  development,  but  dates  back 
into  the  distant  past,  is  strikingly  illustrated  by  the  comments  Post- 
master-General Howe  had  to  make  with  reference  to  it.  In  his  report, 
dated  November  18,  1882,  with  reference  to  salaries  and  allowances  of 
third  and  fourth-class  postmasters,  now  amounting  to  $25,000,000,  he 
says: 

"In  theory  these  orders  are  made  by  the  First  Assistant  Postmaster-Gen- 
eral ;  in  practice  they  are  made  by  a  fourth-class  clerk  in  the  office  of  the  First 
Assistant.  No  matter  by  whom  made,  this  distribution  will  not  be  well  made. 
Finite  intelligence  could  not  make  a  wise  and  just  allotment  of  such  a  fund; 
infinite  intelligence  can  not  be  obtained  in  fourth-class  clerks.  Postmasters  are 
eager  for  large  allowances.  The  most  importunate  are  apt  to  be  best  served. 
They  ask  earliest  and  oftenest.  They  employ  every  kind  of  entreaty,  offer 
every  kind  of  influence,  personal  and  political." 

And  the  report  of  the  accountants  of  the  Joint  Commission  on 
Business  Methods  of  the  Post  Office,  in  commenting  upon  it,  remarks 
that: 

"There  is  still  no  standard  by  which  the  economical  administration  of  a 
postoffice  can  be  gauged.  Appointments  of  postmasters  are  still  made  almost 
entirely  for  political  reasons  and  not  by  reason  of  the  applicant's  ability  or 
knowledge  of  the  workings  of  the  postal  service.  The  criticisms  made  on  the 
compensation  of  third  and  fourth  class  postmasters  still  apply  to  those  of  the 
fourth  class.  This  report,  reread  after  a  lapse  of  twenty-five  years,  gives  a 
striking  illustration  of  the  stagnation  that  has  pervaded  the  whole  administra- 
tion and  perpetuated  defects  which,  even  at  that  time,  were  so  glaring  as  to 
need  the  strong  condemnation  meted  out  to  it  by  the  then  Postmaster-General." 

Shortness  of  Tenure  the  Rule  in  Post  Office 

This  short  and  uncertain  tenure  of  office  of  Postmasters  General 
and  their  Assistants,  including  the  postmasters  of  the  larger  cities, — 
this  series  of  political  gusts  which  is  apt  to  blow  them  into  office  in  one 
political  wind,  and  blow  them  out  in  another,  has  so  far  made  impos- 
sible the  introduction  of  any  radical  and  necessary  reform;  for  al- 
though the  person  in  office  discovers  the  need,  before  he  can  effect  the 
necessary  change,  political  fortune  sweeps  him  out  of  office  again. 
Whatever  progress  in  efficiency  is  claimed  by  one  Postmaster-General 

28 


is  disclaimed  by  his  successor.  You  are  all  familiar,  for  instance,  with 
the  serious  attempts  Mr.  Hitchcock  made  for  his  reform  in  his  depart- 
ment. Just  about  the  time  he  began  fully  to  appreciate  the  true  im- 
mensity of  his  task,  a  political  change  ended  his  Post  Office  career,  and 
such  progress  as  he  claimed  to  have  made  was  promptly  repudiated  by 
his  successor.  For  instance,  this  is  what  Postmaster-General  Burleson 
had  to  say  about  the  work  of  the  Department,  in  a  statement  given 
out  to  the  public  shortly  after  taking  office : 

"  'The  all-absorbing  programme  of  the  last  Administration  was  the  placing 
of  the  Post  Office  Department  on  a  paying  basis,'  says  the  report.  'The  policies 
pursued  in  the  effort  to  succeed  at  this  plan  were  overworked  and  resulted  in 
defective  administration  and  just  criticism  on  the  part  of  the  public. 

"  'That  efficiency  and  economy  should  be  substituted  for  wastefulness  and 
extravagance  needs  no  argument,  but  the  postal  service  affects  so  vitally  the 
interests  of  the  entire  population  of  the  country  that  economy  which  means  a 
curtailment  of  postal  facilities  operates  as  a  check  to  the  social  and  industrial 
progress  of  the  country.  The  people  are  entitled  to  the  best  facilities  adminis- 
tered in  the  most  efficient  manner.  That  the  facilities  furnished  during  the 
last  four  years  were  not  the  best  is  clearly  established  by  the  facts.' " 


Post  Office  Inertia 

As  illustrating  the  difficulty  of  securing  any  reform  under  present 
conditions,  I  would  call  your  attention  to  a  statement  made  by  Mr. 
Fitzgerald,  Chairman  of  the  Commission  on  Appropriations,  appear- 
ing in  the  "Congressional  Record"  under  date  of  January  20,  1914, 
wherein  he  makes  the  following  significant  statement : 

"The  so-called  Economy  and  Efficiency  Commission  to  which  the  gentle- 
man from  Iowa  refers,  and  for  which  perhaps  he  has  more  respect  than  I 
have,  spent  $260,000  in  its  work.  I  have  challenged  from  time  to  time  anyone 
to  point  to  a  single  original  recommendation  which  that  commission  has  made 
which  has  resulted  in  the  saving  of  a  single  dollar  to  the  United  States." 

The  impossibility  of  accomplishing,  under  present  conditions,  any 
improvement  or  reform  in  the  service,  is  true  of  any  of  the  Govern- 
mental Departments  handled  similarly  to  the  Post  Office  Department. 
It  is  interesting,  for  instance,  to  note  the  report  of  Mr.  French,  who, 
under  the  administration  of  President  Roosevelt,  was  commissioned  to 
examine  into  the  condition  of  the  Government  Printing  office.  Mr. 
French's  statement,  appearing  in  the  New  York  Times  under  date  of 
October  10,  1913,  reads  as  follows : 

"I  never  got  beyond  a  preliminary  report  after  about  three  weeks'  work. 
The  work  was  never  finished.  The  expenditures  committee  faded  away,  when 
a  new  Congress  came  in,  and  there  was  nothing  at  all  left  as  evidence  that  it 
had  existed,  except  some  incomplete  and  generally  irrelevant  papers  some- 
where in  dusty  pigeon-holes  and  sundry  entries  on  the  ledger  of  the  disbursing 
clerk  of  the  Senate.  My  report  was  among  those  dust-gathering  papers.  I 
doubt  if  any  member  of  the  committee  ever  read  it.  It  was  wholly  abortive. 
My  work  was  entirely  useless.  The  money  paid  was  absolutely  wasted.  The 
committee  accomplished  nothing,  and  I  have  often  doubted  if  it  ever  intended 
or  wished  to  accomplish  anything.  It  is  against  the  Washington  idea  to  do 
anything  to  check  expenditures.  Yet  I  was  able  to  show  that  at  least  $1,500,000 
a  year  could  be  saved  in  the  operating  of  the  Government  Printing  Office,  with- 
out disturbing  the  condition  of  the  workers  as  to  their  pay  or  privileges." 

29 


Encouragement  of  Permanency  in  Private  Enterprise 

Efficiency,  under  such  circumstances,  is,  of  course,  impossible. 
Permanency  and  continuity  of  personnel  are  essential  to  the  very  heart 
of  an  enterprise,  and  it  is  precisely  because  private  enterprise  recognizes 
and  enforces  this  principle,  that  it  is  so  much  better  equipped  than  pub- 
lic enterprises  to  produce  satisfactory  results.  As  emphasizing  this 
effort  on  the  part  of  the  corporation  to  make  for  loyalty,  efficiency  and 
permanency  in  its  personnel,  I  wish  to  bring  out  the  treatment  of  the 
employees  of  the  telephone  interests,  in  the  adoption  of  its  magnificent 
pension,  sickness,  disability  and  insurance  plan.  The  entire  plan,  aside 
from  the  accident  feature,  which,  of  course  does  not  take  tenure  into 
consideration,  is  arranged  with  a  view  to  encouraging  and  rewarding 
permanency  in  employment.  The  plan  provides  for  the  care  of  em- 
ployees during  sickness  and  accident,  and  the  pensioning  of  employees 
when  they  reach  an  age  when  they  cannot  render  the  service  necessary 
to  conduct  the  business  of  the  company.  It  makes  provision  for  the 
payment,  to  the  beneficiary,  of  insurance  in  cases  where  the  employees 
die  after  five  years  in  the  company's  service, — all  of  this,  without  any 
contribution  on  the  part  of  the  employee  other  than  faithful  and  con- 
scientious service.  The  amount  of  the  payments  increases  with  the 
term  of  employment.  Contrast  this  with  the  treatment  by  the  Govern- 
ment of  its  postal  employees.  Although  continually  agitated,  no  ade- 
quate provision  has  been  made  for  the  relief  or  care  of  its  employees. 
To  refute  any  notion  that  the  employees  in  the  Government's  service 
are  not  subject  to  all  of  the  ills  incurred  in  private  employment,  it  is 
interesting  to  note  the  comment  of  Mr.  Reilly  on  the  floor  of  the  House, 
as  reported  in  the  "Congressional  Record"  of  January  16,  1914: 

"It  was  not  until  I  became  a  member  of  this  body  that  I  learned  that  old 
worn-out  letter  carriers  and  other  superannuated  employees  of  the  Government 
were  not  retired  on  part  pay,  but,  on  the  contrary,  were  dismissed  from  the 
service  when  they  could  no  longer  keep  up  the  pace.  One  of  the  first  letters  I 
received  after  being  elected  a  Member  of  Congress  was  from  an  old  postal 
employee,  who  had  received  an  official  notice  from  his  postmaster  informing 
him  that  he  had  been  off  duty  the  allotted  number  of  days  in  the  year  allowed 
by  the  department  and  that  his  resignation  would  be  accepted.  The  simple 
statement  of  that  heart-broken  man  asking  me  to  assist  in  having  him  kept  on 
the  rolls  made  my  heart  ache.  He  had  spent  34  years  of  his  life  pounding  the 
pavements  in  all  kinds  of  weather  and  at  all  hours  of  the  day  and  night,  and 
was  known  and  loved  by  the  citizens  of  the  community  he  served,  composed  of 
all  classes  and  creeds  and  political  affiliations.  He  had  not  only  given  the  best 
years  of  his  life  to  the  Government  in  building  up  the  Postal  Service,  but  was 
at  an  age  and  in  such  a  condition  that  he  could  not  hope  to  find  employment  of 
any  kind.  He  was  in  such  financial  straits  that  if  thrown  on  the  world  he 
would  have  to  depend  on  the  bounty  of  relatives  or  friends,  or  else  become  a 
public  charge." 

And  in  the  same  issue  of  the  "Record"  we  find  the  following  state- 
ment by  Mr.  Griff  en: 

"The  employees  in  the  Postal  Service,  and  particularly  the  city  and  rural 
carriers,  post-office  clerks,  and  laborers,  are  paid  only  for  the  actual  time  they 
are  employed.  When  overtaken  by  sickness  or  if  they  meet  with  an  accident 
and  become  incapacitated  for  duty  their  pay  ceases  at  once.  It  matters  not  if 
an  accident  was  caused  by  the  grossest  negligence  on  the  part  of  the  Govern- 

30 


ment,  these  employees  have  no  redress  for  damages,  not  even  for  the  loss  of 
salary.  They  are  laid  off  without  pay  until  they  are  able  to  assume  their  official 
duties,  and  should  the  sickness  or  accident  be  of  a  nature  to  confine  them  for 
a  period  of  more  than  150  days  they  are  notified  to  hand  in  their  resignation, 
because  a  department  rule  provides  that  no  employee  will  be  excused  for  a 
longer  period,  no  matter  what  the  cause  may  be.  *  *  *  And  now,  Mr.  Chair- 
man, what  is  the  reward  for  these  men  and  women  who  give  the  best  years 
of  their  lives  to  the  public  service?  Well,  it  is  hard  for  me  to  say  it,  because 
I  detest  ingratitude,  governmental  or  otherwise,  these  employees  are  forced  to 
resign  when  they  become  superannuated,  unceremoniously  kicked  out,  and  told 
that  they  are  inefficient  and  can  no  longer  do  the  work  required  of  them — 
outlived  their  usefulness.  It  is  one  of  the  saddest  incidents  of  our  govern- 
mental life.  Thrown  out  with  the  flotsam  and  jetsam  of  humanity  who  have 
no  aim  or  object  in  life,  because  years  of  ardent  labor  have  used  up  their 
energy  and  vitality.  Yes,  Mr.  Chairman,  like  an  obsolete  piece  of  machinery 
or  a  broken  piston  rod,  they  are  thrown  on  the  scrap  heap." 

How,  under  these  circumstances,  can  we  expect  that  the  efficiency 
of  the  Postal  Service  will  in  any  way  approach  the  present  efficiency  of 
the  telephone  company? 

Permanency  of  Plan  Through  Continuous  Financing 

But  there  is  another  and  very  important  fundamental  difference 
in  the  method  of  management  which  distinguishes  public  enterprise 
from  private,  and  that  is,  Permanency  of  plan  and  purpose  through  a 
proper  scheme  of  financing.  No  enterprise  under  the  sun  can  be  run 
with  a  proper  regard  for  the  needs  of  the  service,  unless  there  be  a 
continuity  of  plan  and  scheme  of  financing  which  will  not  only  take 
care  of  the  present  immediate  needs,  but  which  will  look  far  enough 
into  the  future  to  assure  constant  readiness  on  the  part  of  the  utility  to 
serve  the  needs  of  those  coming  after. 

There  is  on  file  in  the  Engineering  Department  of  the  Bell  Sys- 
tem, and  there  is  a  large  corps  of  employees  constantly  engaged  in  the 
work,  a  comprehensive  series  of  plans  which  are  known  as  fundamental 
development  plans.  They  cover  every  city  of  the  country  in  which  the 
system  operates,  and  the  studies  from  these  plans  anticipate  and  make 
provision  for  growth  for  10,  20  and,  in  some  cases,  30  years  in  ad- 
vance. The  service  which  is  to-day  being  rendered  in  many  of  our 
cities  has  been  made  possible  only  because,  years  ago,  plans  were  made, 
and  rigorously  followed  up  by  the  necessary  investment,  throughout  a 
continuous  period.  As  an  example  of  anticipating  future  needs,  and  as 
controverting  the  notion  that  we  have  reached  the  end  of  our  devel- 
opment, there  are  under  way  to-day  studies  and  preparations  for  the 
future,  directed  by  a  staff  of  550  expert  engineers,  scientists,  former 
professors,  post  graduates,  students  and  scientific  investigators,  the 
graduates  of  over  70  universities.  The  budget  for  this  year  calls  for 
the  expenditure  of  upwards  of  Sixty  Million  Dollars  for  the  additions 
to  and  betterment  in  the  plant,  and  provisions  have  been  made  to  take 
care  of  the  physical  and  financial  side  of  the  telephone  needs  of  the 
country  for  the  next  year,  the  year  following,  and  so  on,  and  when  the 
time  arrives  for  the  maturing  of  these  plans,  there  is  an  absolute  cer- 
tainty that  these  plans  will  be  followed  by  the  necessary  investment 
and  by  the  necessary  execution. 

31 


Familiar  Log-Rolling  Methods  of  Public  Enterprises 

Contrast  this  with  the  way  in  which  public  enterprises  are  financed 
in  this  country.  Congress,  upon  assembling  each  year  in  December,  re- 
ceives a  "Letter  from  the  Secretary  of  the  Treasury."  This  "letter"  is 
a  document  of  no  mean  bulk,  full  of  statistics  purporting  to  show  how 
much  money  the  government  will  have  to  spend  during  the  coming  year 
to  run  its  business.  The  document  is  technically  referred  to  as  the 
Annual  Estimates.  Now,  no  Congressman  imagines  for  a  minute  that 
these  estimates  represent  the  Secretary  of  the  Treasury's  mature  and 
deliberate  judgment  of  what  it  should  cost  to  run  the  Government  for 
the  coming  year.  Every  Congressman  knows  just  how  the  formidable 
array  of  statistics  presented  to  Congress  was  got  up.  He  knows  that 
the  imposing  tables  of  figures  were  prepared  by  the  various  depart- 
ments at  the  beginning  of  their  various  tasks  shortly  after  July  1st; 
that  the  bureaus  proceeded  solely  upon  the  basis  of  the  current  year  to 
guess  at  their  probable  needs  for  a  financial  year  which  was  not  to  be- 
gin for  twelve  months  to  come,  and  not  to  end  until  almost  two  cal- 
endar years  had  elapsed  after  the  time  when  the  work  on  the  estimates 
began.  He  knows,  what  is  more,  that  the  Secretary  of  the  Treasury 
has  practically  no  say  whatever  in  getting  up  the  estimates, — that,  for 
instance,  if  the  War  Department  should  multiply  or  divide  by  ten  its 
previous  estimate  for  river  and  harbor  expenditure,  the  Secretary  must 
remain  silent,  and  embody  the  estimate  in  his  "letter." 


Running  the  Appropriation  Gauntlet 

It  is  not  surprising,  therefore,  that  when  the  estimates  are  passed 
on  to  the  House  Appropriation  Committees,  they  are  treated  as  a  mere 
collection  of  guesses,  not  to  be  taken  seriously,  and  to  be  used  as  a 
guide — the  roughest  of  guides — only  when  political  considerations  are 
absent.  But  political  considerations  are  rarely  absent.  Only  too  often, 
when  the  needs  of  a  service  have  become  exceedingly  pressing,  special 
estimates  are  compiled  after  long  and  scientific  study,  after  laborious 
and  expensive  research,  to  be  lightly  tossed  aside  by  the  Appropri- 
ation Committee,  because  political  expediency  at  the  time  happens  to 
run  counter  to  the  needs  of  the  service.  But  this  is  not  all.  When  the 
nominal  needs  of  the  service  have  adventured  through  the  commit- 
tees and  are  presented  to  the  House,  they  are  subjected  to  the  fire  of 
new  influences,  new  opinions,  new  and  extended  possibilities  of  political 
pressure.  And  when,  in  their  modified,  battered  or  distorted  form,  they 
have  pased  through  the  House,  they  must  run  the  gauntlet  of  the  Sen- 
ate. Then  the  Executive  approves  or  disapproves. 

The  results,  of  course,  are  natural.  Take  a  few  simple  illustrations 
— actual  occurrences  in  the  Post  Office  Department: 

A  printing  plant  in  Cincinnati,  Ohio,  belonging  to  the  City  Post 
Office,  shuts  up  shop.  There  is  plenty  of  work  on  hand  to  keep  it  busy. 
But  the  appropriation  happens  to  have  run  out.  Result :  No  work  for  a 
considerable  period — but  the  salaries  of  the  employees  run  on  as  usual, 
to  be  paid  months  later,  when  a  new  appropriation  can  be  secured. 

32 


Two  time-recording  clocks  in  New  York  City,  belonging  to  the 
Post  Office  Department,  lie  idle  for  months.  Reason :  The  appropria- 
tion has  run  out.  Ten  dollars  would  probably  repair  the  clocks.  But 
not  a  cent  can  be  spent  on  the  clocks  until,  several  months  later,  an 
appropriation  can  be  secured. 

The  traveling  railway  mail  officials  charged  with  investigating  the 
postal  efficiency  in  the  various  parts  of  the  country  are  forced  to  stop 
work  before  the  close  of  the  year.  Reason :  The  appropriation  has  run 
out.  And  the  salaries  are  later  collected  by  the  officials  for  the  work 
they  didn't  and  couldn't  do. 

Uncertainty  of  Appropriation  Bills  Constant  Menace 

These  are  only  a  few  of  the  minor  illustrations  of  what  is  taking 
place,  on  a  vastly  larger  scale,  in  practically  every  Government  Depart- 
ment. Under  our  system  of  government,  a  small  majority  of  either 
house,  or  the  Executive,  may,  by  cutting  off  financial  support,  starve 
or  temporarily  paralyze  any  important  public  need.  Take  so  vital  a 
branch  of  government  activity  as  the  Federal  Civil  Service  Commission. 
Not  only  its  vigorous  administration,  but  its  very  existence,  is  being 
threatened  annually,  not  by  the  repeal  of  the  law  under  which  it  exists, 
—for  that  would  not  be  tolerated  by  the  sentiment  of  the  country, — 
but  by  a  small  crowd  in  one  house  temporarily  securing  sufficient  power 
to  jeopardize  its  fiscal  support.  It  takes  constant  lobbying  on  the  part 
of  its  friends  to  keep  it  from  this  form  of  submersion.  This  is  even 
true  of  State  Legislatures.  In  the  State  of  Colorado,  a  few  years  ago, 
the  Civil  Service  Commission  was  absolutely  abolished  by  a  failure  of 
the  Legislature  to  provide  the  necessary  appropriation.  The  recent 
failure  of  Congress  to  appropriate  money  for  the  Secretary  of  War 
with  which  to  equip  the  militia  with  artillery,  is  another  case  in  point. 
Picture  Mr.  Potter  going  down  to  Washington  and  pleading  with  the 
Government  for  a  new  telephone  office  on  the  assumption  that  he  is 
going  to  get  it,  and  the  Government  telling  him,  "No,  Mr.  Potter,  you 
will  have  to  wait  a  while,  because  the  program  for  this  year  is  five 
battleships." 

Why  only  recently  in  a  debate  in  Congress,  Mr.  Mapes  called  the 
attention  of  the  Chairman  to  the  deplorable  condition  existing  in  the 
Supervising  Architect's  Office,  as  a  result  of  this  financial  constriction 
which  obtains  in  our  fiscal  system.  I  quote  from  the  Congressional 
Record  of  April  7,  1914,  pp.  6807  ff. : 

"MR.  MAPES  :  Mr.  Chairman,  I  desire  to  call  attention  to  a  few  facts  in 
regard  to  the  work  of  the  Supervising  Architect's  Office.  The  question  of  the 
gentleman  from  New  York  is  answered  very  definitely  in  the  hearings — page 
J06 — by  the  Supervising  Architect.  It  appears  from  the  hearings  that  the  office 
is  behind  from  five  to  six  years  in  its  work.  It  takes  between  three  and  four 
years  from  the  time  a  building  is  authorized  before  the  Supervising  Architect's 
Office  can  even  begin  to  prepare  the  plans  and  it  takes  about  six  years  from 
the  authorization  of  the  building  before  the  building  is  completed. 

"The  appropriations  for  this  office  for  the  last  few  years  furnish  a  striking 
illustration  of  the  evil  effects  upon  the  public  service  of  penny-wise  and  pound- 
foolish  economy.  The  appropriation  bill  passed  in  1911,  after  our  friends  on 
the  other  side  of  the  aisle  got  control  of  the  House,  reduced  the  number  of 
employees  in  the  Supervising  Architect's  Office  by  66,  in  spite  of  the  fact  that 

33 


the  work  of  the  office  was  far  behind,  the  number  of  public  buildings  authorized 
was  steadily  increasing,  and  the  work  of  the  office  was  getting  more  and  more 
behind  as  time  went  on.  The  inauguration  of  the  parcel  post  made  it  necessary 
to  enlarge  old  post-office  buildings  and  to  build  new  ones.  The  Architect's 
force  should  have  been  increased  instead  of  decreased. 

"Since  that  time  the  office  has  continued  to  get  more  and  more  behind  in 
its  work,  until  now  it  is  practically  six  years  behind.  If  no  other  public  build- 
ings were  authorized,  it  would  take  six  years  for  that  office  to  catch  up  with 
the  work  already  assigned  to  it.  It  takes  from  three  to  four  years  from  the 
time  a  public  building  is  authorized  by  Congress  before  the  Supervising  Archi- 
tect's Office  can  even  commence  to  give  any  consideration  to  the  plans  for  it. 

"The  Supervising  Architect,  in  the  hearings  before  this  committee,  on  page 
106,  says: 

"  The  public-buildings  act  approved  March  4,  1913,  gave  us  about  four 
years'  work  at  our  present  rate  of  progress.  We  will  not  commence  work  on 
that  bill  for  one  and  a  half  or  two  years.  You  might  say  that  we  have  five 
and  one-half  or  six  years'  work  ahead  of  us.' 

"Again,  he  says : 

(<  'That  at  our  present  rate  of  progress  it  will  not  be  until  the  beginning  of 
the  calendar  year  of  1916  that  we  will  commence  work  on  the  public  buildings 
act,  approved  March  4,  1913.' 

********** 

"The  Supervising  Architect  again,  on  page  107,  says : 

"  'We  find  that  our  clerical  force  available  for  the  administrative  work 
incident  to  the  construction  of  new  buildings  is  not  in  balance  with  the  tech- 
nical force.  *  *  *  It  seems  unwise  to  have  so  many  buildings  under  construc- 
tion when  we  are  unable  to  handle  the  enormous  correspondence  and  adminis- 
trative work  which  naturally  follows.  Letters  accumulate  for  two  or  three 
weeks  before  they  receive  attention  and  the  work  of  construction  is  delayed; 
there  is  complaint  all  along  the  line,  and  we  are  criticized  on  the  floor  of  the 
House.  However,  it  is  a  condition  that  we  cannot  ameliorate  under  existing 
circumstances  unless  you  can  help  us  by  this  balancing  of  the  force.' 

"There  is  not  a  man  here  who  would  tolerate  a  system  in  his  private 
business  that  made  it  necessary  to  hold  up  the  progress  of  building  operations 
for  two  or  three  weeks,  as  testified  to  by  the  Supervising  Architect,  on  account 
of  not  having  enough  help  to  answer  the  correspondence  promptly.  It  is  un- 
businesslike and  wasteful  in  the  extreme  to  allow  such  a  condition  of  affairs 
to  exist. 

********** 

"The  distinguished  chairman  of  the  Committee  on  Public  Buildings  and 
Grounds,  the  gentleman  from  Florida  (Mr.  Clark),  in  a  speech  on  the  floor 
of  the  House  on  February  20  of  this  year,  page  3985  of  the  Record,  corroborates 
the  statement  of  the  Supervising  Architect.  *  *  * 

"  'There  is  probably  not  a  Member  upon  this  floor  who  has  been  here  for 
six  years  or  more,  unless  he  represents  a  district  in  one  of  our  large  cities, 
who  has  not  a  building  authorized  for  his  district  which  has  been  pending  for 
three  or  four  years  and  which  to-day  appears  no  nearer  being  built  than  it 
did  the  day  the  bill  which  provided  for  it  passed  Congress.  Under  the  methods 
obtaining,  after  a  building  is  authorized,  the  patience  of  the  community  is  worn 
threadbare  before  construction  on  the  foundation  is  begun.  In  one  place  in 
my  district,  where  I  secured  an  authorization  for  a  post-office  building,  some 
of  the  older  inhabitants  are  beginning  to  date  things  back  to  "the  time  when 
Clark  got  a  building  for  us,"  and  yet  not  a  shovel  of  dirt  has  been  thrown 
toward  preparing  for  the  foundation/ 

"I  do  not  know  how  far  back  into  ancient  history  the  act  was  passed  au- 
thorizing the  public  building  in  his  district  to  which  the  distinguished  chairman 
of  the  Committee  on  Public  Buildings  and  Grounds  refers,  but  he  has  described 
a  situation  that  exists  all  over  the  country,  and  yet  the  Supervising  Architect's 
Office  is  obliged  to  get  along  with  an  inadequate  force.  The  work  continues 
to  pile  up  and  the  public  service  continues  to  suffer." 

34 


Troubles  of  Foreign  Governments 

Nor  is  this  condition  peculiar  to  the  United  States.  We  find  pre- 
cisely the  same  principle  operating  in  every  foreign  government.  Take 
France,  for  example.  The  head  of  the  telephone  service  will  submit 
to  the  Chamber  of  Deputies  a  hundred  chapters  of  minute  and  elab- 
orate statistics.  "We  must  have  so  and  so  many  francs  for  construc- 
tion and  improvement,  or  the  telephone  service  will  continue  to  deteri- 
orate." The  appropriating  body  will  receive  the  demand,  and  with  it, 
perhaps,  hundreds  of  chapters  of  statistics  from  other  departments. 
Nearly  800  chapters  are  sometimes  submitted  by  the  twelve  ministers 
who  constitute  the  department  heads  in  France.  The  Budget  Com- 
mittee is  literally  swamped  with  statistics.  Even  if  the  members  were 
entirely  free  from  political  considerations,  they  could  not  possibly 
frame  a  proper  business  judgment  on  the  needs  of  each  service.  The 
outcome  is  only  natural.  The  telephone  administration  may  ask  for 
an  appropriation  of  a  hundred  million  francs  to  carry  out  a  wise  plan 
of  construction  and  equipment,  which  would  result  in  annual  economies 
and  bring  the  telephone  service  up  to  the  requirements  of  the  public. 
The  call  is  simple :  "A  stitch  in  time,  to  save  ninety  and  nine."  But 
if  the  appropriation  body  considers  it  better,  politically,  to  expend 
money  for  warships,  or  waterways,  or  public  buildings,  the  telephone 
budget  will  be  cut  in  two,  and  the  Telephone  Department  must  shift  as 
best  it  can  on  "short  rations."  This  may  mean  no  rations  at  all,  for  a 
hundred  millions  may  be  an  absolute  minimum,  without  the  expenditure 
of  which  the  proposed  construction  would  be  useless.  Year  in  and 
year  out,  the  official  Budget  Reporter  calls  attention  to  this  fatal  gap 
between  the  public  purse  and  the  public  plant,  and  efforts  have  been 
made  in  the  past  to  beseech  the  Chambers  of  Commerce  to  supply  the 
needed  investment,  because  the  money  could  not  be  obtained  in  time  or 
at  all,  from  the  Government. 

A  striking  example  of  the  results  of  this  policy  is  furnished  by  the 
case  of  the  Gutenberg  Exchange,  Paris.  After  a  dozen  years  of  tele- 
phone stagnation — during  which  period  there  were  years  in  which  no 
telephone  appropriations  were  made  at  all,  and  years  when  appropri- 
ations were  so  large  that  they  could  not  be  used  before  they  were  with- 
drawn— the  Government  installed  the  "common  battery"  system  in  the 
Gutenberg  Exchange.  This  system  had  long  since  been  adopted  in 
America,  but  in  France  it  was  still  regarded  as  a  new  improvement. 
No  sooner  was  the  system  installed,  than  the  French  Government  was 
warned  that  unless  it  provided  connections  of  greater  electrical  capa- 
city, it  would  have  trouble  from  the  higher  voltage.  But  the  warning 
fell  on  deaf  ears.  The  Government  felt  that  it  had  spent  enough.  The 
result  was  a  conflagration,  which  completely  reduced  the  exchange  to 
junk  and  ashes,  and  left  a  large  section  of  the  city  stranded  without 
telephone  communication. 

It  will  be  seen,  therefore,  that  some  radical  change  in  our  method 
of  "financing  public  enterprises — not  to  be  accomplished  in  one  day  or 
one  year — is  necessary,  before  we  can  hope,  in  tte  management  of  our 
Post  Office  Department— to  approach  the  efficiency  and  service  af- 

35 


forded  by  private  enterprise ;  some  reform  which  will  insure  a  complete 
freedom  from  the  gusts  of  opposing  policies — political  or  otherwise — 
some  system  which  will  provide  a  reasonable  guaranty  that  deliberate 
and  painstaking  planning  will  be  followed  by  equally  deliberate  and 
painstaking  execution. 

American  Optimism  Would  Not  Save  Us  from  Fate  of  Europe 

Of  course,  we  quite  naturally  must  take  a  great  deal  of  pride  in  the 
achievements  of  American  industry  (the  unfortunate  exception  being 
the  advocates  of  Government  ownership),  and,  when  looking  at  our 
telephone  development,  it  may  be  that  some  will  say  that  if  this  Gov- 
ernment undertakes  an  enterprise  of  this  kind  we  can  avoid,  by  experi- 
ence, the  pitfalls  of  foreign  nations.  However,  to  steer  clear  of  this 
erroneous  assumption,  we  only  have  to  consider  the  wonderful  progress 
which  European  nations  have  made  in  what  everyone  concedes  to  be 
purely  governmental  enterprises.  Take  the  road-building  of  France, 
Germany,  England,  the  canal  construction,  town  planning,  magnificent 
public  buildings,  drainage,  etc.,  which  have  served  as  models  for  many 
of  our  State  and  municipal  enterprises  in  this  country.  Consider  the 
unfortunate  experience  in  this  country  in  similar  undertakings,  with 
charges  of  inefficiency,  graft,  etc.,  notably  the  canal  and  road-building, 
without  mentioning  any  State.  We  thus  see  that,  where  the  govern- 
ments abroad  have  confined  their  efforts  to  governmental  functions  we 
may  learn  much  from  them,  but  where  they  have  departed  from  that 
field  and  entered  fields  of  private  enterprise,  they  have  dismally  failed 
where  we,  retaining  private  management,  have  magnificently  succeeded. 

An  Earnest  Appeal  to  Mr.  Lewis 

In  order  that  this  and  similar  discussions  may  prove  of  some  con- 
structive value,  I  want  to  make  an  appeal  to  Mr.  Lewis  and  his  friends. 
Certainly,  neither  he  nor  any  other  right-thinking  person,  after  con- 
sidering what  we  have  been  discussing,  would  wish  to  plunge  the  coun- 
try into  an  experiment  which,  if  it  should  fail,  would  cripple  the  busi- 
ness interests  and  practically  destroy  any  hope  of  a  continuation  of  our 
magnificent  growth.  To  remove,  so  far  as  possible,  any  element  of 
danger,  will  they  not  at  once  start  a  movement  for  the  establishment  of 
efficient  business  in  the  Government  service  ?  Will  they  not  do  the  very 
self-evident  and  proper  thing;  compel  the  adoption  by  the  govern- 
mental departments  of  adequate  and  modern  means  of  accounting  so 
that  every  item  of  expense  and  income  may  have  its  proper  place  and 
be  considered  in  determining  the  relative  efficiency  of  departments  one 
with  the  other,  or  with  similar  departments  elsewhere?  Will  they  not 
actively  start  a  campaign  to  bring  stability  into  the  organization  which 
has  charge  of  our  enormous  governmental  undertakings?  Will  they 
not  try  to  make  merit  alone  a  determining  factor  in  promoting  new 
officials  and  retaining  old  ones? 

In  doing  this,  they  will  have  the  support  of  every  conservative  per- 
son and  interest  in  the  country,  particularly  organizations  such  as  the 

36 


Providence  Economic  Club  and  the  Merchants'  Association  of  New 
York,  which,  at  present,  occupies  a  peculiar  position.  That  organiza- 
tion was  foremost  in  its  determination  to  secure  a  revision  in  the 
express  rates,  and,  under  our  magnificent  plan  of  governmental  con- 
trol, secured  relief  for  the  business  interests  of  the  country  in  the  pro- 
mulgation by  the  Interstate  Commerce  Commission  of  a  new  rate 
schedule  and  zone  system.  That  same  organization  was  strong  in  its 
support  of  Mr.  Lewis  and  others  in  connection  with  the  adoption  by 
the  Government  of  the  parcels  post  feature  of  our  postal  system.  They 
readily  recognized  the  proper  place  for  this  new  and  valuable  service. 
But  that  same  organization  is  to-day  waging  an  active  fight  to  prevent 
the  absolute  destruction  of  the  express  system, — a  service  which  is 
needed  by  every  business  interest  in  the  country.  That  same  organi- 
zation is  to-day  waging  this  same  campaign  which  we  are  asking  Mr. 
Lewis,  with  his  great  ability,  to  father,  namely/  one  which  will  result 
in  the  elimination  of  ignorance  and  guess  in  measuring  the  true  results 
of  postal  operations,  whereby  the  service  may  be  reconstructed  and 
placed  upon  a  modern  and  efficient  basis. 


The  Time  to  Seriously  Consider  the  Question 

When  Mr.  Lewis  and  his  friends  have  brought  about  the  result 
that  the  Post  Office  Department  of  this  country  is  managed  on  an 
economical  and  scientific  basis ;  when  the  Postmaster-General  is  secure 
in  his  tenure,  so  long  as  he  is  efficient  and  active ;  when  his  subordinates 
are  appointed  solely  on  account  of  ability ;  when  they  are  retained  and 
promoted  as  a  reward  for  faithful  service;  when  the  Government  has 
adopted  a  fair  and  equitable  scheme  of  pension  and  benefits  for  its 
employees;  and  when  the  Government  has  brought  about  a  condition 
where  appropriations  are  made  the  result  of  careful  and  conscientious 
study  by  its  officers,  and  not,  as  at  present,  made  a  football  for  am- 
bitious and  unscrupulous  politicians,  subject  to  all  of  the  evils  of  log- 
rolling and  political  bickering, — then,  I  say,  and  not  until  then,  will  we 
be  in  a  position  for  a  proper  and  judicious  discussion  of  the  effect  of 
so  radical  a  movement  as  Mr.  Lewis  proposes.  At  that  time  we,  as 
employees,  will  have  no  objection  to  the  serious  consideration  of  such 
a  question,  perfectly  secure  in  the  thought  that  this  service,  the  thing 
we  are  all  striving  for,  will  be  reasonably  safe. 


President  Wilson's  Conservative  Position 

As  showing  that  the  task  I  am  asking  Mr.  Lewis  and  his  friends 
to  assume  is  worthy  of  his  mettle,  I  want  to  quote  from  President 
Woodrow  Wilson,  in  his  work,  "The  State": 

"But  the  proposition  that  the  government  should  control  such  dominating 
organizations  of  capital  may  by  no  means  be  wrested  to  mean  by  any  necessary 
implication  that  the  government  should  itself  administer  those  instrumentalities 
of  economic  action,  which  cannot  be  used  except  as  monopolies.  Government 
regulation  may  in  most  cases  suffice.  Indeed,  such  are  the  difficulties  in  the 

37 


way  of  establishing  and  maintaining  careful  business  management  on  the  part 
of  the  government  that  control  ought  to  be  preferred  to  direct  administration 
in  as  many  cases  as  possible — in  every  case  in  which  control  without  adminis- 
tration can  be  made  effectual." 

I  feel  confident  that  the  "difficulties  in  the  way  of  establishing  and 
maintaining  careful  business  management  on  the  part  of  the  Govern- 
ment" will  not  prevent  our  good  friend  Mr.  Lewis  from  tackling  the 
problem,  and  I  wish  to  say  that  if  he  is  a  big  enough  man,  should  he 
fail  in  his  efforts  to  establish  proper  business  management  on  behalf 
of  the  department  to  which  he  wishes  to  entrust  the  future  of  this  im- 
portant industry,  he  would  undoubtedly  be  the  first  to  demand  that 
further  attempts  at  extending  the  functions  of  the  Post  Office  Depart- 
ment be  suspended  until,  with  the  support  of  some  new  movement, 
there  is  first  established  such  efficiency  in  management  on  the  part  of 
the  Government  as  will  insure  continuance  of  "good  service" — the 
thing  which  alone  counts.  Gentlemen,  I  thank  you. 


38 


AN  •INITIAL 


25  CENTS 


WILL  INCREASE  TO  Sc  THE  PE*ALTY 

"AY    AND    TO    *1  00    ON     T^0"  THE  FOU"TH 
OVERDUE.  N    THE    SEVENTH     DAY 


LD  21-loOm-7,'33 


Gaylord  Bros. 

Makers 

Syracuse,  N.  V. 
WT.  JAN.  21,  igoj 


UNIVERSITY  OF  CAUFORNIA  LIBRARY 


